China and Iran's efforts to help Pakistan overcome its economic crisis have brought some much-needed relief to the country's struggling economy. With foreign exchange reserves at their lowest in 10 years and the International Monetary Fund (IMF) delaying unlocking the next tranche of a $6.5 billion loan, Pakistan has been forced to look elsewhere for help.
China has stepped in with a new $700 million loan made through the state-owned China Development Bank to boost the country's foreign exchange reserves by about 20 percent. This loan comes as Pakistan is negotiating with the IMF to unlock funds from the previously agreed bailout package.
It is worth noting that China is currently the largest creditor of Pakistan, with its commercial banks holding approximately 30 percent of Pakistan's external debt.
Meanwhile, Iran has established six border markets to promote trade with Pakistan. Iran's Consul General Hasan Noorain said in the last 10 months, the volume of bilateral trade between the two countries has reached $2 billion dollars, adding that the target has been set at $5 billion.
He further informed trading is facing difficulty due to the absence of a banking channel. He added that progress is being made in barter trade with Pakistan and that the visa policy has been relaxed to facilitate trade between the two countries.
In order to secure funding from the IMF, the country has been implementing policy changes in line with the conditions set out by the Washington-headquartered financial body.
These changes include measures to increase tax revenues and promote a more equitable distribution of valuable resources. The IMF has recommended reducing subsidies for those who do not require them, as part of this effort to improve resource allocation.
In response to the recommendations, 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.
Additionally, the government raised prices on fuel and essential commodities, which has made it challenging for the general public to fulfill their basic needs.
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