Pakistan turns to China, US for financial support

Pakistan is turning to both China and the United States for financial assistance as its 30 billion yuan swap line with China is set to expire in 2027, according to Finance Minister Muhammad Aurangzeb. The minister expects a response from Washington within two months on a proposed $10 billion exchange stabilisation facility. Pakistan currently relies on external financing to maintain foreign exchange reserves and meet debt repayments, making support from China, Gulf states, and multilateral lenders crucial for economic stability.

The entire 30 billion yuan swap line from China has already been drawn, and Aurangzeb stated that the government is open to seeking additional financing once the facility is up for renewal. Formal requests will be made at the time of renewal, following the established process. Meanwhile, the United States is being approached regarding the $10 billion exchange stabilisation facility, with potential support from the Export-Import Bank of the United States (EXIM) and the U.S. International Development Finance Corporation (DFC) also being explored.

The EXIM financing could aid Pakistan International Airlines in aircraft purchases, while the DFC may contribute to a $5 billion plan to upgrade the country's oil refineries.

Aurangzeb clarified that there are no concerns about seeking support from both the United States and China simultaneously, emphasizing that it is an "and-and" situation. He highlighted the strong relationship between China and Pakistan at the leadership level, praising the understanding and relationship with the Trump administration.

The recent Middle East conflict has led to elevated crude oil prices, causing some uncertainty. Pakistan has managed the initial price spike well, but the outlook has become more precarious if the conflict persists into November or December. If this occurs, it could jeopardise the government's 4% growth target for the fiscal year.

As of now, Pakistan has sufficient oil stocks to cover its needs through September and is well-positioned for October, with an institutionalised mechanism monitoring the situation daily. Planning for November supplies is already underway.