Pakistan receives $2.2 bn loan from China to stabilize economy

Chinese Foreign Minister Wang Yi and Pakistani Foreign Minister Shah Mehmood Qureshi shake hands after a news conference at the Diaoyutai State Guesthouse in Beijing, China on March 19, 2019. (Reuters)
Updated 25 March 2019
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Pakistan receives $2.2 bn loan from China to stabilize economy

  • Chinese loan boosts foreign exchange reserves to around $11 billion
  • Currency reserves remain under constant pressure due to increasing foreign debt obligations

KARACHI: Pakistan on Monday received a $2.2 billion loan from staunch ally China to stabilize high fiscal and current account deficits, raising the country’s foreign exchange reserves to around $11 billion.
The move comes as Pakistan, which has opened talks with the International Monetary Fund about a possible bailout, faces a struggle to avoid a balance of payments crisis that has left it with growing debts and dwindling foreign exchange reserves.
“Yes we have received $2.2 billion from the China today,” Abid Qamar, a spokesman for the State Bank of Pakistan (SBP) told Arab News.
In November last year, China promised to support Pakistan’s economy following a meeting in Beijing between Chinese Premier Li Keqiang and Pakistani Prime Minister Imran Khan but the exact amount of the loan package was not announced.
“The inflow of Chinese financial assistance will improve foreign exchange reserves and ensure balance of payment stability,” Dr. Khaqan Hassan Najeeb, a spokesperson for the finance ministry, said.
Central bank data for up until March 15, 2019 shows that with the injection of the Chinese loan, foreign exchange reserves will increase to around $11 billion and total liquid reserves to around $17.9 billion.
Pakistan has been searching for investment from friendly countries since the government of Prime Minister Imran Khan took office in August. Last year, both Saudi Arabia and the United Arab Emirates also offered Islamabad loan packages of $3 billion. Saudi Arabia offered an additional $3 billion for import of oil on differed payments.  
But despite the foreign inflows, currency reserves remain under constant pressure due to increasing foreign payment obligations. The rupee traded at 140.40 against the US dollar in the interbank market on Monday as compared to 140.36 on Friday.
“There was no impact of the Chinese inflows today on the exchange rate but it could be on Tuesday,” Zafar Paracha, General Secretary of Exchange Companies Association of Pakistan, told Arab News. “Uncertainty about IMF is one of the reasons. Despite foreign inflows, currency reserves are continuously falling.”
Pakistan’s net international reserves also continue to deteriorate on the back of high debt repayments. Over the next twelve months, Pakistan has to pay $14.6 billion in debt servicing including $12.8 billion as principal repayment and $1.8 billion as interest, according to Arif Habib Limited research.


US intelligence says Huawei funded by Chinese state security: report

Updated 20 April 2019
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US intelligence says Huawei funded by Chinese state security: report

  • The accusation comes at a time of trade tensions between Washington and Beijing
  • Huawei dismissed the allegations

US intelligence has accused Huawei Technologies of being funded by Chinese state security, The Times said on Saturday, adding to the list of allegations faced by the Chinese technology company in the West.
The CIA accused Huawei of receiving funding from China’s National Security Commission, the People’s Liberation Army and a third branch of the Chinese state intelligence network, the British newspaper reported, citing a source.
Earlier this year, US intelligence shared its claims with other members of the Five Eyes intelligence-sharing group, which includes Britain, Australia, Canada and New Zealand, according to the report.
Huawei dismissed the allegations in a statement cited by the newspaper.
“Huawei does not comment on unsubstantiated allegations backed up by zero evidence from anonymous sources,” a Huawei representative told The Times.
The company, the CIA and Chinese state security agencies did not respond immediately to requests for comment.
The accusation comes at a time of trade tensions between Washington and Beijing and amid concerns in the United States that Huawei’s equipment could be used for espionage. The company has said the concerns are unfounded.
Authorities in the United States are probing Huawei for alleged sanctions violations.
Meng Wanzhou, Huawei’s chief financial officer and daughter of its founder, Ren Zhengfei, was arrested in Canada in December at the request of the United States on charges of bank and wire fraud in violation of US sanctions against Iran.
She denies wrongdoing and her father has previously said the arrest was “politically motivated.”
Amid such charges, top educational institutions in the West have recently severed ties with Huawei to avoid losing federal funding.
Another Chinese technology company, ZTE Corp. , has also been at the center of similar controversies in the United States.
US sanctions forced ZTE to stop most business between April and July last year after Commerce Department officials said it broke a pact and was caught illegally shipping US-origin goods to Iran and North Korea. The sanctions were lifted after ZTE paid $1.4 billion in penalties.
Reuters reported earlier this week that the United States will push its allies at a meeting in Prague next month to adopt shared security and policy measures that will make it more difficult for Huawei to dominate 5G telecommunications networks.