Cash-strapped Pakistan requests another year to pay back Chinese loans

Islamabad: A debt-ridden Pakistan has requested its all-weather ally China that it needs another year to pay back a billion dollars Islamabad had borrowed from Beijing last year.

According to The Frontier Post, Prime Minister Imran Khan has written a letter to Chinese Premier Li Keqiang on June 8 that July 23, 2021, was the date when Pakistan is supposed to return one billion dollars it had borrowed.

Imran Khan further stated that due to this support by China, “this deposit is contributing significantly easing pressure on our external account.”

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He requested that another 12 months be given to Pakistan to pay back this loan at an interest rate of one per cent, according to The Frontier Post.

Earlier, a bankrupt Pakistan’s debt problems escalated when China declined to restructure USD 3 billion in liabilities.

Islamabad has requested Beijing to forgive debt liabilities owed to China-funded energy projects established under the China-Pakistan Economic Corridor (CPEC).

Media reports suggest that China has refused to budge on Islamabad’s request to renegotiate the power purchase agreements, saying that any debt relief would require Chinese banks to amend the terms and conditions under which the credits were extended.

The banks, including China Development Bank and the Export-Import Bank of China, were not prepared to revise any of the clauses of the agreement reached earlier with the government, Beijing said in response to the request to renegotiate terms.

Pakistan has already entered a sovereign debt “danger zone” with total liabilities and debts of USD 294 billion representing 109 per cent as a percentage of GDP as of 30 December 2020.

As Pakistan’s financial debt continues to mount, the country’s total debt and liabilities rose to Rs 45.470 trillion at the end of March 2021, an increase of Rs 2.666 trillion or 6.2 per cent a year earlier, according to data from the State Bank of Pakistan (SBP).

Meanwhile, the debt owed by the government to the International Monetary Fund (IMF) rose to Rs 1.164 trillion from Rs 1.071 trillion.

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