US Secretary of State Antony Blinken on Tuesday urged Pakistan to seek debt relief and restructuring from China, its single-largest creditor after the country has seen widespread flood-induced devastation.
At least 1,600 people have lost their lives while the estimated cost of flood damages and losses stands at a staggering $28 billion with nearly a third of the country still submerged by the deluge.
Pakistan has made similar appeals for “debt swaps for climate action” to other countries.
“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 Foreign Minister Bilawal Bhutto Zardari in Washington, according to a state department readout of the meeting.
The two officials also discussed the US flood relief, counter-terrorism cooperation and Pakistan’s relations with India.
Pakistan has to repay around $1.1 billion to the Paris Club countries. Overall Pakistan owes $10 billion to rich countries that include Japan, France, Germany, the US and others.
The country has to pay $16 billion dollars to the non-Paris Club countries. Out of that Pakistan owes $14.6 billion alone to China.
According to the international news agency Bloomberg, Pakistan owes about a third of its total external debt to its neighbouring country. 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.
Plans are in place for the government 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.
The International Monetary Fund (IMF) also cautioned Islamabad that investments in the second phase of the China-Pakistan Economic Corridor (CPEC) 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 IMF to help avert a default.
Pakistan has spoken with the Fund and World Bank about immediate debt relief as well.
The US on Tuesday announced $10 million in aid for Pakistan’s flood relief efforts in addition to the already announced assistance of $56.1 million after FM Bilawal met with US Secretary of State Anthony Blinken in Washington DC.
According to the Foreign Office spokesperson, Bilawal apprised Blinken about “the devastation caused by the cataclysmic floods with more than 33 million people displaced and a huge loss of lives and livelihoods”.
The minister also highlighted the relief efforts of the government and people of Pakistan and thanked the US government for its assistance.
US suggests Pakistan seek debt relief from China
