China likely to join Pakistan financial rescue effort

2 Nov 18

China has indicated it will support Pakistan as the country struggles with a “very difficult” economic situation.

The country has already received a $6bn rescue package from Saudi Arabia, but new premier Imran Khan is continuing to seek help from other international allies. He has also asked the IMF to start negotiations for a bailout package. 

Pakistan’s foreign reserves have plunged by 42% since the start of the year and now stand at $8bn. The current account deficit has swollen to about $18bn, for which Khan has blamed the previous government.

During a visit to Beijing, Khan, who was elected in July, told Chinese president Xi Jinping that his government had “unfortunately inherited a very difficult economic situation”.

“Countries go in cycles. They have their high points, they have their low points,” he said.

“Unfortunately, our country is going through a low point at the moment with two very big deficits, a fiscal deficit and a current account deficit.

“And so we, as I’ve said, have come to learn [from China].”

In response, Xi reaffirmed the relationship between the two countries.

He said: “I attach great importance to China-Pakistan relations and am willing to work together with the prime minister to strengthen the China-Pakistan all-weather strategic partnership and build a new era of China-Pakistan destiny.”

There was no mention of economic aid or a loan package from China, when the two premiers spoke to reporters, but they are expected to sign a number of agreements.

Although Khan has already approached the IMF, he expressed concern over the lender’s loan conditions and is keen to find financial help elsewhere.

An IMF bailout would be the country’s 13th rescue package from the lender since the end of the 1980s.

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