China’s President Xi Jinping met Pakistani Prime Minister Shehbaz Sharif in Beijing on Friday, according to Chinese state media. This meeting assumes significance given the fact that it has taken place days before Pakistan is expected to present its annual budget and apply for a fresh International Monetary Fund (IMF) loan.
Sharif’s government is likely to seek at least 6 billion USD under a new IMF programme after it presents its annual budget, which sources say will happen on June 10. And the $27 billion or so that Pakistan owes China, according to World Bank data, is central to this next round of discussions with the fund.
Pakistan’s location on the Arabian Sea gives it strategic importance for China, providing an overland route out towards the Gulf of Aden and onto the Suez Canal, and enabling Chinese ships to avoid the potential chokepoint of the Malacca Strait.
In May, the IMF initiated discussions on the new loan after Islamabad completed a short-term 3 billion programme, which helped stave off a sovereign debt default last summer.
Pakistan owes China almost 13% of its total debt, which was taken on to pay for infrastructure projects over the years and other kinds of expenditure.
Beijing has lent Islamabad almost twice as much as its second- and third-ranked multilateral lenders, the World Bank and the Asian Development Bank, to which Pakistan owes $16.2 billion and $13.7 billion respectively.
Chinese firms have additionally invested $14 billion in Pakistan since a new economic corridor connecting their countries was announced in the summer of 2013 as part of
President Xi Jinping’s flagship Belt and Road Initiative, data from the American Enterprise Institute think tank shows.
Most of that investment was made by Chinese state-owned energy companies financing fossil-fuel and nuclear power plants, and logistics routes being constructed to connect the Gwadar Port in the Arabian Sea with the Xinjiang region in China’s northwest.
(With Inputs From Reuters)
