China has extended a $2 billion loan to Pakistan, offering critical financial relief as the South Asian country navigates a challenging economic landscape. Khurram Schehzad, adviser to Pakistan’s finance minister, confirmed the development in a message to Reuters on Saturday.

The loan extension comes at a crucial time for Pakistan, which is working to stabilize its economy after securing a $7 billion bailout from the International Monetary Fund (IMF) in September 2024. The first tranche of the IMF loan is currently under review, and if Pakistan meets the necessary conditions, it stands to receive an additional $1 billion.

Pakistan has long struggled with securing external financing, a key condition for IMF assistance. Over the years, the country has relied heavily on international lenders, including China, Saudi Arabia, and the UAE, to meet its debt obligations and maintain foreign exchange reserves.

According to Fitch Ratings, Pakistan faces external debt repayments exceeding $22 billion in the fiscal year 2025. A significant portion of this—nearly $13 billion—comprises bilateral deposits from friendly nations. The rollover of China’s loan provides temporary relief but underscores Pakistan’s urgent need for long-term economic reforms to reduce dependency on foreign assistance.

Despite these financial lifelines, Pakistan continues to grapple with inflation, currency devaluation, and fiscal deficits. The government is under pressure to implement structural reforms, improve tax collection, and enhance export performance to achieve sustainable economic growth.

China’s continued support highlights the strategic ties between the two nations, particularly under the China-Pakistan Economic Corridor (CPEC). However, analysts warn that repeated reliance on debt rollovers is not a sustainable solution and that Pakistan must prioritize fiscal discipline to avoid future financial crises.

China has extended a $2 billion loan to Pakistan, offering critical financial relief as the South Asian country navigates a challenging economic landscape. Khurram Schehzad, adviser to Pakistan’s finance minister, confirmed the development in a message to Reuters on Saturday.

The loan extension comes at a crucial time for Pakistan, which is working to stabilize its economy after securing a $7 billion bailout from the International Monetary Fund (IMF) in September 2024. The first tranche of the IMF loan is currently under review, and if Pakistan meets the necessary conditions, it stands to receive an additional $1 billion.

Pakistan has long struggled with securing external financing, a key condition for IMF assistance. Over the years, the country has relied heavily on international lenders, including China, Saudi Arabia, and the UAE, to meet its debt obligations and maintain foreign exchange reserves.

According to Fitch Ratings, Pakistan faces external debt repayments exceeding $22 billion in the fiscal year 2025. A significant portion of this—nearly $13 billion—comprises bilateral deposits from friendly nations. The rollover of China’s loan provides temporary relief but underscores Pakistan’s urgent need for long-term economic reforms to reduce dependency on foreign assistance.

Despite these financial lifelines, Pakistan continues to grapple with inflation, currency devaluation, and fiscal deficits. The government is under pressure to implement structural reforms, improve tax collection, and enhance export performance to achieve sustainable economic growth.

China’s continued support highlights the strategic ties between the two nations, particularly under the China-Pakistan Economic Corridor (CPEC). However, analysts warn that repeated reliance on debt rollovers is not a sustainable solution and that Pakistan must prioritize fiscal discipline to avoid future financial crises.