China Reschedules $2 Billion in Debt, Providing Pakistan with Major Relief and Boosting Economic Stability
China has agreed to reschedule over $2 billion of Pakistan's debt for two years, providing relief for the country's cash-strapped state and allowing it to allocate resources for development. This move strengthens the economic ties between the two nations and showcases their strong partnership.
In a major relief to Pakistan, China has agreed to reschedule over $2 billion of its debt for a period of two years. The Economic Coordination Committee (ECC) of the Cabinet, chaired by Finance Minister Ishaq Dar, approved the revised terms of the agreement reached between Islamabad and Beijing. This move comes as Pakistan is working towards rebuilding its foreign exchange reserves through fresh loans. The debt rescheduling will pause the repayment of more than $625 million in the fiscal year, allowing Pakistan to allocate its financial resources towards other areas of development.
Additionally, China has agreed to pause over $2 billion of repayments that were due in two years. This agreement is a testament to the strong economic ties between the two nations, with China consistently helping Pakistan meet its debt obligations through new loans and the rollover of existing debt.
The rescheduling of debt is a significant development for Pakistan, considering the country's cash-strapped state. With the construction of two nuclear power plants in Karachi, costing a total of $9.5 billion, China has been a crucial financing partner, providing $6.5 billion for the project through the Export-Import (Exim) Bank of China. China's support in refinancing a $1.3 billion commercial loan in June played a crucial role in preventing a default on Pakistan's international debt obligations. This support was especially important as the International Monetary Fund program was stalled at that time.
Since then, Pakistan's gross official foreign exchange reserves have rebounded to $8.7 billion, a significant improvement from the critically low level of $4.5 billion before the IMF agreement. Although the Ministry of Finance has yet to release an official statement regarding the ECC's endorsement of the revised agreement with China, the rescheduling of debt showcases the strength of the economic partnership between the two countries. This move not only provides relief for Pakistan's financial situation but also strengthens the overall economic stability of the region.