Islamabad September 27 2022: US Secretary of State Antony Blinken urged Pakistan to discuss debt relief and restructuring with China, its single-largest creditor after the flood-ravaged South Asian nation made a similar appeal to other countries.
Pakistan has faced catastrophic levels of climate change-fueled flooding this year. About a third of the country has been submerged by the deluge that has killed at least 1,600 people so far and caused damage estimated at more than $30 billion.
“I also urged our colleagues to engage China on some of the important issues of debt relief and restructure so that Pakistan can more quickly recover from the floods,” Blinken told Pakistan’s Foreign Minister Bilawal Bhutto Zardari in Washington, accor
ding to a State Department read out of the meeting. The two men also discussed US flood relief, counter-terrorism cooperation and Islamabad’s relations with India.
Pakistan owes $30 billion to China, or about a third of its total external debt. Beijing has made nearly $26 billion in short and medium-term loans to Pakistan and Sri Lanka over the past five years as its overseas lending shifts from funding infrastructure toward providing emergency relief, according to AidData, a research lab at William and Mary, a university in the US.
Pakistan plans to speak with China after talking with the members of the so-called Paris Club, an informal group of wealthy nations that bailed out governments from Argentina to Zambia, Prime Minister Shehbaz Sharif told Bloomberg in an interview last week.
Pakistan is a flagship for China’s Belt and Road Initiative with projects worth more than $25 billion completed that ended the nation’s power generation crisis and helped it mine its coal. The IMF also cautioned Pakistan that investments in the second phase of the China-Pakistan Economic Corridor could raise growth prospects but the project loans could “pose a risk to debt sustainability,” it said in a report released this month.
The impact of the historic flooding became more evident by the end of August, about the same time that Pakistan secured a $1.1 billion loan from the International Monetary Fund to help avert a default. Pakistan has spoken with the IMF and World Bank about immediate debt relief as well.
