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China agrees to provide fresh funding to Pakistan to avert default, claims Financial Times

Pakistan is preparing for more repayment deadlines that might push the nation into default even though it anticipates China to roll over more than $2 billion in debt that is due next month.

Pakistan’s current foreign reserves are only $4.3 billion, and it has around $3.7 billion in foreign debt due this month and in June as a result of the stalled IMF funding plan.

According to a report of the UK-based paper Financial Times (FT), two top-ranking Pakistani officials claimed that Beijing has agreed to provide fresh funds right away after Pakistan makes two major debt repayments totaling $2.3 billion in June. 

The refinancing of the $1.3 billion in commercial loans and the $1 billion loan from the Chinese government will help Pakistan in avoiding an immediate default, Pakistani authorities told FT.

Beijing extended some loans to Pakistan earlier this year. During a visit to Pakistan earlier this month, Chinese Foreign Minister Qin Gang reaffirmed Beijing’s financial support for the nation.

China’s foreign ministry promised to “help Pakistan achieve stability” in a letter to the Financial Times. “China and Pakistan are all-weather strategic cooperative partners,” it said.

One of Pakistan’s closest allies, China was likely to provide help, according to a number of analysts, although they cautioned that this would not eliminate the risk of default.

In reference to the June debt deadlines, Uzair Younus, head of the Pakistan Initiative at the Atlantic Council, a Washington-based think tank, said: “There’s no way that the Chinese… will walk back from Pakistan at this time.”

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