As a country’s single-largest creditor, the US has urged Pakistan to look towards debt relief and restructuring from China. The country has seen widespread flood-induced devastation recently.
More than 1,600 people have died due to the effects of flood and the cost of flood damage and losses is valued at $28 billion. The government has issued similar pleas to other countries for debt swaps to prevent further climate change effects.
“I also advised our colleagues in China to step up debt relief and assistance to Pakistan, so the country can more quickly recover from the floods,” Blinken said in a meeting with Foreign Minister Bilawal Bhutto Zardari.
In addition to discussing US-Pakistan relations, they also discussed counter-terrorism cooperation, Pakistan’s debt, and the Paris Club. Pakistan owes $10 billion to countries including Japan, France, Germany, and the US.
Pakistan must pay $16 billion over to the countries, not to the Paris Club. China alone will receive $14.6 billion from the nation.
Bloomberg reports that Pakistan owes about a third of its total external debt to its neighboring country, China, which has provided close to $26 billion in short- and medium-term loans. AidData, a research lab at William and Mary, indicates that Beijing’s overseas lending shift has shifted from funding infrastructure to providing emergency relief.
Plans are being made to have the prime minister of Pakistan speak with China. After talking to other members of the so-called Paris Club, an informal group of wealthy nations that bailed out countries like Argentina and Zambia. The prime minister of Pakistan, Shehbaz Sharif said in an interview that he gave to Bloomberg last week.
Flood Impacts After August
China has completed $25bn worth of projects in Pakistan by leveraging its Belt and Road Initiative. These projects include highways, railroads, and ports.
On the China-Pakistan Economic Corridor (CPEC), a project that could boost Pakistan’s economy and national debt, the International Monetary Fund (IMF) has suggested the government should proceed cautiously.
The impact of the historic flooding became even more apparent at the end of August, about the same time that Pakistan secured a $1.1 billion loan from the IMF to prevent a default.
Pakistan has spoken with the World Bank and Fund about immediate debt relief.
The United States announced $10 million in aid for relief efforts in Pakistan after Secretary of State Blinken met with FM Bilawal.
Bilawal asked for a warning from Blinken about catastrophic floods which have displaced 33 million people, with millions dying and their livelihoods ruined.
The minister also highlighted the relief efforts of the government and people of Pakistan, as well as thanked the US government for its assistance.