KARACHI
\nConcerns are rising in Pakistan\u2019s financial sector amid negotiations with Chinese authorities over rescheduling energy sector loans.
\nOn Friday, Finance Minister Muha\u00admmad Aurangzeb met China\u2019s central bank governor Pan Gongsheng and exchanged views on bilateral finance cooperation, according to a statement from the People\u2019s Bank of China.
\nMr Aurangzeb reached Beijing on Thursday for talks on power sector debt relief alongside structural reforms suggested by the International Monetary Fund.
\nStakeholders are anxious about the talks\u2019 outcome, fearing significant repercussions for foreign investment and exchange rate stability if things don\u2019t go as desired.
\n\u201cWe believe China will not outright reject Pakistan\u2019s request to reschedule energy sector loans, but the final outcome appears bleak,\u201d said a senior banker closely monitoring the situation.
\nHe said that China was initially reluctant to discuss the issue, leading to a delayed visit, signalling their disagreement with Pakistan over talks related to energy loans.
\nChina has been Pakistan\u2019s largest foreign investor for years. Investment from Hong Kong, which is considered Chinese-approved, also plays a significant role. While Chinese investments have declined, they remain the largest in FY24.
\nCombining investments from China and Hong Kong, foreign direct investment (FDI) amounted to nearly half of Pakistan\u2019s total inflows, which increased by 17 per cent in FY24.
\nDespite this growth, total inflows were just $1.9 billion, with China ($568 million) and Hong Kong ($338m) contributing a combined $906m.
\n\u201cOur dependency on China has increased as we negotiate to reschedule $15bn in energy sector loans, receive the highest FDI from China, and rely on them as our largest trade partner,\u201d said S.S. Iqbal, a senior banker. \u201cChina has also been providing loans or rescheduling payments to strengthen our reserves.\u201d
\nOn March 23, 2018, the People\u2019s Bank of China signed an agreement with the State Bank of Pakistan to provide a $2bn loan via China\u2019s State Administration of Foreign Exchange (SAFE) to shore up Pakistan\u2019s foreign exchange reserves.
\nThis loan has been rolled over annually since 2018, with the most recent rollover occurring on Feb 29, 2024. The loan was due in March and was extended for one year.
\n\u201cWhile China has supported our reserves, the State Bank stopped a $1.8bn profit outflow to Chinese investors in FY24,\u201d Mr Iqbal said, wondering, \u201cHow can the Chinese sit calm and cool with this kind of treatment?\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
KARACHI Concerns are rising in Pakistan\u2019s financial sector amid negotiations with Chinese authorities over rescheduling energy sector loans. On Friday, Finance Minister Muha\u00admmad Aurangzeb met China\u2019s central bank governor Pan Gongsheng and exchanged views on bilateral finance cooperation, according to a statement from the People\u2019s Bank of China. Mr Aurangzeb reached Beijing on Thursday for […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":{"0":"post-421132","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-top-news"},"yoast_head":"\n