"Pakistan Facing 'Economic Crisis' Says China and Saudi Arabia Promise 18 Trillion Support"

Downtown Karachi, Pakistan submerged due to heavy rain.
[Image source=Yonhap News]

[Asia Economy Reporter Jang Hyowon] Pakistan, facing a national default crisis, is reported to have secured a total of $13 billion (approximately 18.3 trillion KRW) in support from China and Saudi Arabia.

According to local Pakistani media on the 6th (local time), Finance Minister Ishaq Dar told reporters that Prime Minister Shehbaz Sharif recently visited China and obtained a $4 billion (approximately 5.6 trillion KRW) loan from the Chinese government. Pakistan is said to be in a severe economic crisis and on the brink of national default due to massive floods.

He also stated that Pakistan refinanced $3.3 billion (approximately 4.7 trillion KRW) from a Chinese commercial bank and agreed to increase the currency swap with China from 30 billion yuan (approximately 5.9 trillion KRW) to 40 billion yuan (approximately 7.9 trillion KRW), thereby receiving a total of $8.75 billion (approximately 12.3 trillion KRW) in support.

The so-called 'No. 1 Railway Main Line' project, a high-speed rail project worth $9.8 billion (approximately 13.8 trillion KRW), will also be promptly resumed. This project is an ultra-long high-speed rail line with a total length of 1,726 km, connecting Karachi, Islamabad, and Peshawar from south to north in Pakistan.

Pakistan is currently estimated to owe China $23 billion (approximately 32.5 trillion KRW). The country has incurred astronomical debt by recklessly pursuing low-profit China-Pakistan Economic Corridor (CPEC) projects such as the high-speed rail project. Therefore, to overcome Pakistan's fiscal crisis, support from China, including debt restructuring, is necessary.

The Pakistani government also expects support from Saudi Arabia. Minister Dar said, "The Saudi government responded positively to our request to increase the current $3 billion (approximately 4.2 trillion KRW) loan to $6 billion (approximately 8.5 trillion KRW) and to provide an additional $1.2 billion (approximately 1.7 trillion KRW) in oil facility support," adding, "Support will be provided after about a month of administrative processing."

In addition, he revealed that arrangements to receive $1.4 billion (approximately 2 trillion KRW) in support, including $500 million (approximately 700 billion KRW) from the Asian Infrastructure Investment Bank (AIIB) and $900 million (approximately 1.3 trillion KRW) from the World Bank (WB), are nearly finalized.

Pakistan's economy has been mired in difficulties due to large external debt from massive infrastructure investments, compounded by the COVID-19 pandemic and severe flooding. Although Pakistan recently secured $1.17 billion (approximately 1.7 trillion KRW) in bailout funds from the International Monetary Fund (IMF), enormous funds are still needed for large-scale debt repayments and flood damage reconstruction.

This content was produced with the assistance of AI translation services.