Pakistan takes $1 Billion loan from China

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Lahore, 7th August: Reportedly Pakistan owes $1 billion to Saudia Arabia, so it recently borrowed $1 billion from China to pay off that loan.

As always, Pakistan has turned back to its long term loyal friend China for help so it does not default on international debt obligations.

According to the Pakistani Ministry of Finance and the State Bank of Pakistan (SBP), Pakistan has taken a loan of $1 billion from China to repay a $1 billion loan taken from Saudi Arabia. Desperate Pakistan did so because it had defaulted the payment due to which Saudi Arabia would have reduced its financial support.

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In October 2018, Saudi Arabia had agreed to provide $6.2 billion worth of financial package to Pakistan for three years. This included $3 billion in cash assistance and $3.2 billion worth of annual oil and gas supply on deferred payments.

Saudia gave $1 Billion to Pakistan in November 2018 and $1 Billion in December 2018 while the last $1 Billion was paid in January 2019.

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It is believed that the Chinese government has provided $1 billion in loans to Pakistan to retain the official gross foreign currency reserves at their current levels. Unlike Saudi loan that had been taken on the books of the central bank, the Chinese loan has been taken on the books of the federal government due to another condition of the IMF.

China has further tightened its control over Pakistan as the $6.8 billion railway project of China Pakistan Economic Corridor began on 5th August. 90% of its funding is done by China.

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Under the project, Pakistan’s existing 2,655 km railway tracks will be upgraded to allow trains to move up to 165 km per hour, this is double the speed of the current trains.

China has planned to invest a total of $60 billion and more in infrastructure projects in Pakistan as part of the CPEC agreement. Like others, even this project is part of Beijing’s Belt and Road Initiative which includes the development of land and sea routes in Asia and beyond.

After all this information it is not hard to believe the fact that Pakistan owes more money to China than it owes to the IMF.

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