Strapped for cash, Pakistan looks to China and the Middle East for help

Beijing, November 3, 2018: Pakistani Prime Minister Imran Khan and Chinese Premier Li Keqiang. 

Jason Lee-Pool/Getty Images

Beijing, November 3, 2018: Pakistani Prime Minister Imran Khan and Chinese Premier Li Keqiang. 

Pakistan’s Prime Minister Imran Khan wrapped up a four-day visit to China on Monday without achieving his primary goal of securing Chinese financing. As the South Asian nation scrambles for external help, it may have no choice except to approach the International Monetary Fund for what would be its second bailout in five years.

Beijing is committed to assisting Islamabad but more talks are needed, Chinese Vice Foreign Minister Kong Xuanyou was quoted as saying on Saturday after a meeting between Khan and Chinese Premier Li Keqiang.

Pakistan’s economy, however, may not be able to wait much longer. The country urgently needs a capital boost in order to avert a looming balance of payments crisis. Foreign reserves held by the central bank dropped below $8 billion in late October, raising concerns about Islamabad’s ability to finance monthly import bills.

Beijing is one of Islamabad’s closest allies and a major investor, having loaned the South Asian nation around $4 billion in the 2017-2018 fiscal year that ended in June, according to multiple reports. Chinese President Xi Jinping has also committed billions to building the China-Pakistan Economic Corridor. A network of transport, energy, industrial and agricultural projects, the CPEC runs from the Pakistani city of Gwadar to the Chinese region of Xinjiang.

Beijing’s decision to hold off on more loans — its most recent one, worth $2 billion, came days following Khan’s election in July — may be tied to the trade spat with Washington, suggested Sahar Khan, a visiting research fellow at the Cato Institute. The world’s second largest economy has experienced tightened liquidity conditions recently amid currency declines and pressure from U.S. President Donald Trump’s tariffs.

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