Pakistan Turns to China, Middle East for Financial Aid

Pakistani Prime Minister Imran Khan and China's Premier Li Keqiang
Pakistani Prime Minister Imran Khan (centre L) and China's Premier Li Keqiang attend a signing ceremony at the Great Hall of the People in Beijing, China, November 3, 2018.
(Photo: REUTERS/Jason Lee/Pool)

Pakistan Prime Minister Imran Khan recently went to China as part of the effort to secure financial aid for his country. Despite gaining an audience with some of China's top government officials, there is no concrete evidence that the South Asian state will receive what it initially sets to achieve.

Before his travel to China, Prime Minister Khan received $6 billion in aid package from Saudi Arabia. Nevertheless, the country is still looking for more financial aid in order to offset the payment crisis it is currently suffering from. Reports claim that Mr. Khan is still looking for available outlets for funds before finally approaching the International Monetary Fund.

Following Mr. Khan's meeting with Chinese Premier Li Keqiang, Chinese Vice Foreign Minister Kong Xuanyou said that while China is leaning towards giving financial aid to Pakistan, more talks are still needed before Beijing will feel comfortable giving such aid.

While this offers a glimpse of hope for Pakistan, the country only has a small window to operate what is left in its coffers before diving deeper into this crisis. Pakistan is in dire need of cash in order to boost avert the looming effects of the payment crisis. The country's central bank reported that foreign reserves dropped below $8 billion late in October.

China is one of Pakistan's major ally and biggest investor. The Asian superpower has loaned the country around $4 billion up until in June. Moreover, President Xi Jinping has shown his commitment to Pakistan by pouring billions of dollars into the China-Pakistan Economic Corridor (CPEC) which aims to build a network of agricultural, energy, industrial, and transport projects. The CPEC connects the Pakistani city of Gwadar to China's Xinjiang region.

Financial analysts have suggested that the reason behind China's decision to stall its financial aid to Pakistan might be due to the trade war it is currently involved in with the United States. Because of this trade war, China has experienced quite a lot of scrutiny especially with regards to liquidity conditions. Moreover, the country is also reeling from the effects of the massive trade tariffs from the United States.

As for help from the Middle East, Pakistan has already received $6 billion from Saudi Arabia. However, there are no signs that the Middle East country will offer additional aids anytime soon, especially now that the country is still reeling from the backlash of the murder of Jamal Khashoggi, a known critic of Saudi Arabia.

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