Broke Pakistan can’t pay back $2.4 billion loan to China, pleads for refinance

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Amidst a weakening economy, Pakistan Prime Minister Imran Khan has requested Chinese Premier Li Keqiang to further refinance an RMB 15 billion (around $2.4 billion)  loan that was extended to the country three years ago for another three years on existing terms and conditions, local vernacular media reported.</p>
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Loan refinancing refers to the process of taking out a new loan in order to pay off one or more outstanding loans. The three-year loan was earlier extended on March 25 in 2019 by a consortium of Chinese banks, including, China Development Bank, Bank of China and Industrial & Commercial Bank of China, to finance the trade between the two countries, to fund projects under the China-Pakistan Economic Corridor (CPEC), as well as other earmarked projects, the reports said.</p>
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The previous loan was provided at an interest rate of six-month Shanghai Interbank Offered Rate (SHIBOR) plus a 2.50 per cent margin for a period of three years with maturity on March 25, 2022.</p>
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Pakistan has been facing acute liquidity issues and has been seeking debt restructuring and deferments from international donors.</p>
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China is snaring Pakistan in the Belt of Road Initiative (BRI) debt trap with high-interest rates, stiff repayment terms and lack of transparency.</p>
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According to an International Monetary Fund study, the external debt of Pakistan ballooned to USD 90.12 billion in April 2021, with Islamabad owing China USD 24.7 billion, or over 27 per cent of the debt burden of Pakistan.</p>
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According to the IMF, the burden of hidden and sovereign debts would be a major cause of concern for Pakistan in the coming days as the assets of Pakistan will be tied to the Chinese economy.</p>
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Imran Khan's party Pakistan Tehreek-e-Insaf (PTI), when in opposition, had questioned the terms and conditions of CPEC projects and the lack of transparency around them.</p>
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However, Pakistan today has no way out but to toe the Chinese line is evident from the way Pakistan President Imran Khan in his visit to Beijing during the Winter Olympics endorsed China's misdemeanours in Xinxiang, Tibet, Taiwan and the South China Sea.</p>