Islamabad Seek $3b Loan Support From Beijing

Pakistan is seeking a $3 billion loan from China to stabilize its shrinking foreign exchange reserves and additionally looking for investment opportunities in half a dozen sectors during Prime Minister Imran Khan next week expected visit to Beijing.

Government sources told that the prime minister would also look for Chinese support in the field of trade, finance, and investment, in addition to political engagement.

The sources further added that a meeting to finalize the agenda would take place on Tuesday, two days before the scheduled visit.

The premier will depart for Beijing and attend the inaugural session of the Winter Olympics on February 3.

The government is taking into consideration requesting China for the approval of another loan of up to $3 billion in State Administration of Foreign Exchange, which is known as SAFE deposits, told by a government senior finance ministry official.

Pakistan has already received almost $11 billion from China in the form of foreign exchange reserves support initiatives, including $4 billion in SAFE deposits and commercial loans.

The loans from China are part of the current official foreign exchange reserves of the country recorded at $16.1 billion.

Pakistan had paid over Rs26 billion interest to China in the last fiscal year, only for using $4.5 billion to repay the Chinese trade finance facility maturing debt.

Pakistan has already consumed a $3 billion loan last month, which was received from Saudi Arabia. Before the Saudi loan injection, the foreign exchange reserves were $15.9 billion which on January 21 have already fallen to $16 billion.

The government is also looking for Chinese investment in six sectors by featuring the competitive edge that Pakistan has in the areas of cheap skilled labor, tax exemptions, and access to the two wealthiest continents of the world.

Azfar Ahsan, the chairman of the Board of Investment stated that we will be marketing information technology, textile, automobile, pharmaceutical, agriculture, and footwear sectors against the Chinese investment.

The government is expected to inform the 75 companies of China that it will provide access to trade routes to Africa, the Middle East, and the rest of the world, contributing an extra incentive in the form of freight cost reduction.

Federal Planning and Development Minister Asad Umar said to The Express Tribune that the government had chosen these sectors with the participation of the China Pakistan Economic Corridor (CPEC) Authority for foreign investment which showed evidence of significant benefits for Chinese investors. 

According to the CPEC Authority officials, charges of sea freight are often 2% to 10% of the product unit cost. Pakistan will be able to offer considerably low and better rates to the two largest import destinations.

Compared to 15,000 Euros from China, the freight costs 4000 Euros if imported from Pakistan to EU destinations. And costs 6,700 Euros from Pakistan compare to 12,500 Euros from China to the United States East Coast. These rates were also less compared with Bangladesh, India, and Cambodia. 

Similarly, Pakistani labor is also two times cheap than China which offers a great opportunity to the Chinese industry.

The Pakistan government has shown progress on the remaining withheld payments issue of about Rs230 billion to power producers of China and has paid Rs50 billion so far. And expected to pay another Rs50 billion next month.