Pakistan Requests China to Reschedule Debt to Prevent Delays in $7 Billion IMF Program
Pakistan has formally requested China to defer $3.4 billion in debt payments for two years as part of an effort to fulfill a crucial condition for the International Monetary Fund (IMF) loan program. Failure to secure this debt rescheduling before the upcoming IMF review talks in March 2025 could result in delays to the disbursement of loan tranches or even the cancellation of the $7 billion program. Deputy Prime Minister Ishaq Dar made the request during a visit to China. While Islamabad maintains that Beijing is willing to cooperate, some analysts have expressed doubt about whether the Export-Import (Exim) Bank of China will agree to defer payments on loans due from October 2024 to September 2027 before the IMF review.
The request highlights Pakistan’s significant reliance on China to meet IMF terms and avoid default. The country must identify financing sources to fill a $5 billion gap in external financing for the three-year IMF program. However, China has shown hesitance toward the IMF’s stringent terms, which could expose sensitive details about Pakistan’s financial obligations, particularly regarding Chinese loans and the China-Pakistan Economic Corridor (CPEC). According to reports, the IMF has urged Islamabad to seek oil on deferred payment terms from Saudi Arabia and request China to reschedule its debt, marking the IMF’s increasing concern over Pakistan’s debt management and economic reforms (Reuters, 2024; Dawn, 2024).
In November 2024, the IMF raised concerns over Pakistan’s tax shortfall and delays in securing foreign loans, which have hindered the progress of the $7 billion loan package. These delays, along with Pakistan’s failure to meet the IMF’s conditions, led to a three-month delay in securing the new loan program. As part of the agreement, the IMF also required Pakistan to arrange for a rollover of debt repayments with China, the UAE, and Saudi Arabia, as well as additional financing. In the most recent talks, Pakistan has been trying to secure a minimum of two-year extensions for repaying Chinese loans, which are due from October 2024 to September 2027.
Ishaq Dar has criticized the IMF, accusing the institution of deliberately delaying the release of funds and attributing the setback to geopolitical factors. However, the IMF’s concerns are centered on Pakistan’s external debt, which exceeds $130 billion, with nearly 30% owed to China (DW, 2024). Analysts suggest that Pakistan’s economic dependence on China has grown significantly over the past decade, raising concerns among global lenders who fear that loans might be used to repay Chinese debt rather than fund much-needed economic reforms.
Pakistan’s repeated requests to China for debt rescheduling—this being the second such request in five months—highlight the country’s ongoing struggle to meet the IMF’s financing requirements. A joint statement issued during President Asif Ali Zardari’s recent visit to Beijing acknowledged China’s support in ensuring Pakistan’s fiscal stability, but the debt rescheduling remains critical for Pakistan to meet the IMF’s external financing requirements (AA, 2024). The debt, which is set to mature between October 2024 and September 2027, coincides with the three-year IMF program period, making its rescheduling a necessary step for Pakistan to bridge the financing gap.
The formal review of Pakistan’s $7 billion IMF loan program is expected to begin in the first week of March 2025. A successful review would unlock the next loan tranche of over $1 billion. However, Pakistan has faced challenges in negotiating with external lenders such as China, Saudi Arabia, and the UAE since 2019 to delay debt payments in order to prevent the failure of multiple IMF programs.
Despite frustrations from the Exim Bank, which has reportedly expressed concerns about the repayment delays and the inability of Pakistan to make timely payments to Chinese companies operating in Pakistan, the country remains heavily dependent on China. Beijing continues to provide vital financial support, including rolling over $4 billion in cash deposits, $6.5 billion in commercial loans, and $4.3 billion in trade financing (Brecorder, 2024; Tribune, 2024).
The increasing reliance on Chinese financial support has sparked concerns about a growing “debt-trap” strategy, where Pakistan’s economic dependency on China could be leveraged to influence its foreign, defense, and economic policies. President Zardari’s visit to China underscored this reality, with the primary focus on securing debt rescheduling rather than advancing broader bilateral relations.
Given these ongoing financial dependencies, global lenders such as the IMF may need to reconsider their approach to Pakistan’s bailout programs. Pakistan’s economic structure may remain heavily reliant on China, and the country could struggle to fulfill the terms and conditions required by international lenders.
References
- https://www.freepressjournal.in/world/pakistan-urges-china-to-postpone-usd34-billion-loan-repayments-amid-economic-struggles
- https://www.aa.com.tr/en/asia-pacific/pakistan-s-president-zardari-kicks-off-5-day-state-visit-to-china/3471908
- https://profit.pakistantoday.com.pk/2023/11/22/imf-wb-seek-transparency-in-foreign-funded-projects-under-cpec-and-sifc/
- https://www.reuters.com/world/asia-pacific/imf-pakistan-wrap-up-unscheduled-talks-7-bln-bailout-2024-11-16/
- https://www.aljazeera.com/news/2024/9/11/uncertainty-looms-as-pakistan-awaits-imfs-approval-of-7bn-bailout-package
- https://www.dawn.com/news/1876582
- https://www.reuters.com/world/asia-pacific/china-pakistan-pledge-boost-cooperation-infrastructure-mining-projects-2025-02-06/
- https://www.reuters.com/world/asia-pacific/pakistan-wins-additional-financing-assurances-china-uae-saudi-imf-official-2024-09-26/
- https://www.brecorder.com/news/40342417/chinese-exim-bank-refuses-to-extend-concessional-loans
- https://www.dw.com/en/how-chinese-loans-trapped-pakistans-economy/a-69841139
- https://tribune.com.pk/story/2527399/takeaways-from-president-zardaris-china-trip
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