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Business News/ News / India/  China, Iran, Uzbekistan come to Pakistan's rescue from economic crisis

China, Iran, Uzbekistan come to Pakistan's rescue from economic crisis

Pakistan has been modifying its policies according to the conditions laid down by IMF, in an effort to get IMF loan.

Pakistan is getting help from Iran and China. Premium
Pakistan is getting help from Iran and China.

Pakistan is struggling with its worst economic crisis in decades with its foreign exchange reserves, at their lowest in 10 years. China and Iran have come forward to help the crisis-hit Pakistan to come out of the financial collapse, while the International Monetary Fund (IMF) is delaying unlocking the next tranche of a $6.5 billion loan. 

The country has been modifying its policies according to the conditions laid down by IMF, in an effort to get funding. The Washington-headquartered financial body has suggested raising tax revenues and a fairer distribution of precious resources by taking subsidies away from people who don't need them.

Following this, the national assembly of Pakistan unanimously approved the government’s Finance (Supplementary) Bill 2023 or ‘mini-budget’, and increased taxes on luxury goods and services. The country has also raised the prices of fuel, and essential commodities, making it difficult for common people to fulfill their basic needs. 

Amid this unstable economic situation, Iran is promoting trade with Pakistan, while China has granted a new $700 million loan to the country. 

China lends $700 loan to shore up foreign reserves 

This week, Pakistan has received a new $700 million loan from China to help shore up its foreign exchange reserves, in another step to help the South Asian nation recover from an economic crisis, according to Reuters.

Finance Minister Ishaq Dar announced the news on Twitter and referred to the deposit as a "lifeline" for Pakistan. “AlhamdoLilah! Funds $700 million [were] received today by [the] State Bank of Pakistan from [the] China Development Bank."

The credit facility, made through the state-owned China Development Bank will boost Pakistan's forex reserves by about 20% and comes as the country is thrashing out a deal with the International Monetary Fund (IMF) to unlock funds from a $6.5 billion bailout.

China is already Pakistan's single largest creditor with its commercial banks holding about 30% of its external debt.

Iran promotes trade with Pakistan amid financial crisis 

Iran has established six border markets to promote trade with crisis-hit Pakistan, said Iranian Consul General Hasan Noorain as quoted by pkrevenue. In the last 10 months, the volume of bilateral trade reached $2 billion dollars, he said, adding that the target has been set at $5 billion.

Noorain also said that trading is facing difficulty due to the absence of banking channel. He added that the visa policy has also been relaxed, and progress is also being made in barter trade with Pakistan.

He said that Pakistan and Iran have friendly relations, however, the trade between the two sides has not developed as it should have so far.

Uzbekistan signs $1 billion trade with Pak

Uzbekistan has also inked a $1 billion deal to increase bilateral trade with Pakistan at the 8th meeting of the Pakistan-Uzbekistan Inter-governmental Commission on Trade-Economic and Scientific-Technical Cooperation (IGC) held in Tashkent on Friday. 

Both countries have signed the agreement to encourage the exchange of goods and services, the Economic Affairs department of the Pakistan government said in an official statement. 

Any investment opportunity will come as a lifeline to Pakistan's economy which is struggling with its worst financial crisis.


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Published: 23 Feb 2023, 09:46 AM IST
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