Pakistan Requests Additional Loan from China
Pakistan has formally asked China for an extra loan of 10 billion yuan (around USD 1.4 billion) to tackle its ongoing financial challenges. This request was made by Pakistan’s Finance Minister, Muhammad Aurangzeb, during a meeting with China’s Vice Minister of Finance, Liao Min. Pakistan aims to increase the current Currency Swap Agreement limit from 30 billion yuan to 40 billion yuan.
The request comes after Pakistan fully utilized the existing 30 billion yuan trade facility for debt repayment. If approved, the total facility would reach approximately USD 5.7 billion. This follows China’s recent extension of the current USD 4.3 billion facility for three more years, with the debt repayment period extended to 2027.
Pakistan’s Ministry of Finance did not specify the reasons for the new request, but reports suggest uncertainties about other loans have prompted the need for more financial support. In addition, Pakistan accepted a USD 600 million commercial loan at an 11% interest rate, which raised concerns but was clarified by the IMF as not being tied to Pakistan’s USD 7 billion bailout package.
The bilateral currency swap agreement, originally signed in 2011, aims to promote trade and investment between the two countries. Despite the support, Pakistan’s foreign exchange reserves remain insufficient to meet its debt obligations. The finance minister expressed gratitude to China for its support and mentioned plans to issue a Panda bond in the Chinese market to diversify financing options.
Doubts Revealed
Pakistan -: Pakistan is a country located in South Asia, sharing borders with India, Afghanistan, Iran, and China. It has a rich history and diverse culture.
Yuan -: Yuan is the currency used in China, similar to how India uses the Rupee. It is used for buying and selling things in China.
Currency Swap Agreement -: A Currency Swap Agreement is a deal between two countries to exchange their currencies. It helps them trade with each other more easily without needing to use a third currency like the US Dollar.
IMF -: IMF stands for International Monetary Fund. It is an organization that helps countries by giving them advice and loans to manage their economies better.
Finance Minister -: A Finance Minister is a government official responsible for managing a country’s money matters, like taxes, spending, and loans. In Pakistan, this person is Muhammad Aurangzeb.
Commercial Loan -: A commercial loan is money borrowed from a bank or financial institution for business purposes. It needs to be paid back with interest over time.
