Pakistan struggles to pay Chinese debts amid ballooning external payments

Islamabad: Beijing’s debts are squeezing Pakistan’s pinched finances as external payments are set to balloon to USD 14 billion at the end of this financial year and nearly half is owed to Chinese commercial banks, largely for the Belt and Road Initiative (BRI) related projects, a media report said.

Experts say that Pakistan needs to ask Beijing’s financial authorities to reschedule its debts. It will ease pressure on the State Bank of Pakistan at a time when the bank’s foreign reserves fell to USD 17 billion in October, reported Asia Times.

Earlier in April, the International Monetary Fund had warned that Pakistan’s public debt sustainability was being undermined due to policy slippage and mounting contingent liabilities.

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The World Bank’s Debt Report 2021 — which analysed the debts of South Asian countries — showed Pakistan lagging behind India and Bangladesh.

The report also emphasised that it was more comparable with debt-beleaguered Sri Lanka.

According to the WB report, Pakistan was the second nation after Sri Lanka among countries with a debt-to-GDP ratio exceeding 80 per cent. But if Pakistan’s net revenue, excluding the share of the provinces, is calculated then it ranks even higher than Sri Lanka.

On Friday, Pakistan’s Senate was told that internal debt increased from Rs 16 trillion (USD 91 billion) to 26 trillion (USD 148 million) over this period. Similarly, external debts swelled from Rs 8.5 trillion (USD 48.3 billion) to Rs14.5 trillion (USD 83 billion) in the same period. On these loans, the ministry said, the government paid Rs7.46 trillion (USD 42.4 billion) in interest, according to the Asia Times.

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