Facing mounting financial pressure and rising tensions with India, Pakistan has sought a fresh loan of 10 billion yuan ($1.4 billion) from China, after having already exhausted its existing $4.3 billion facility.
The appeal, made public on April 27, highlights Islamabad’s deepening fiscal woes. Pakistan’s Finance Minister Muhammad Aurangzeb made the official request to China’s Vice Minister of Finance, Liao Min, during the recent IMF and World Bank annual meetings held in Washington. He requested an increase in the existing currency swap agreement limit from 30 billion yuan to 40 billion yuan, according to a statement from Pakistan’s Finance Ministry issued on April 26.
Although Pakistan has previously urged China to expand the swap limits, Beijing has traditionally been hesitant. This fresh request comes just weeks after China extended the $4.3 billion facility for another three years during Chinese Prime Minister Li Qiang’s visit, stretching Pakistan’s debt repayment timeline to 2027.
Under the China-Pakistan financial arrangement, Islamabad has already fully utilized the $4.3 billion trade finance facility to manage its external debt repayments.
Meanwhile, Aurangzeb expressed optimism that the IMF executive board would approve the Staff Level Agreement for a new $1.3 billion climate resilience loan program and complete the first review of Pakistan’s ongoing $7 billion bailout program by early May. Approval is expected to unlock a $1 billion disbursement critical to stabilizing Pakistan’s fragile economy.
The timing of Pakistan’s new request coincides with sharply escalating tensions in the region. Diplomatic relations with India have deteriorated further following the Pahalgam terror attack in Kashmir that killed 26 tourists, intensifying economic and political pressures on Islamabad.
Commenting on the impact of strained ties with India, Aurangzeb admitted the situation was “not going to be helpful” for the economy. He noted that bilateral trade with India had already dwindled, amounting to just $1.2 billion in the last year.
As Pakistan continues to navigate through multiple economic and diplomatic challenges, its heavy reliance on external financing remains a key point of concern for global observers.
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