By Mahua Venkatesh

New Delhi, May 19: Will China come to the rescue of cash-starved Pakistan, which is inching closer to a default amid delay in revival of the $6.5 billion loan from the International Monetary Fund (IMF) China has not made any statements over the deepening political crisis in the South Asian nation but concerns have risen.

"China's stakes in Pakistan are high. It also needs Pakistan to contain India but the moot question is whether Beijing will be willing to completely bailout Pakistan. That is a matter of debate," an analyst told India Narrative.

Global ratings agency Moody's has already warned that Pakistan may default if it fails to receive the IMF's bailout package. Despite hectic parleys, the two have not yet reached any consensus. And now with the political turmoil, Pakistan's hopes of thrashing out an agreement with IMF is fading. In this situation, Pakistan will have no other choice but to reach out to its allies, particularly China, which has its flagship China Pakistan Economic Corridor (CPEC) running through the South Asian country.

While China refrained from offering any substantial financial support to the bankrupt Sri Lanka, Pakistan's case may be different as Beijing will have its own interests to protect.

However, analysts said that China is currently focusing on putting its own house in order and therefore may be able to provide only "some help" but not pull Pakistan "completely out of the danger". "China does not have the kind of warewithal that is required to rescue Pakistan. Only an IMF can do that. At most China can offer some help that can pull Pakistan for a few more months," the analyst said.

China's own challenges

Multiple economic challenges have also hit China since the Covid outbreak.

The steady rise in debt-public as well as private-has become a cause for serious concern for Beijing. China's overall debt is difficult to assess as a large part of it is borne by the local governments and state owned enterprises. Forbes noted that the size of China's debt problem is truly staggering. "At last measure, debt of all sorts - public and private and in all sectors of the economy - amounted to the equivalent of $51.9 trillion, almost three times the size of China's economy as measured by the country's gross domestic product," it said.

To add to the problem, its own economic growth is slowing down with unstable macro-economic indicators. In April, the country's S&P Purchasing Managers' Index accorded by S&P for manufacturing once again fell below the 50 mark to 49.5 indicating uneven recovery trends.

China lending to other countries

News agency Reuters said that between 2008 and 2021, China spent $240 billion bailing out 22 countries which are its exclusive debtors and play a large role in its ambitious Belt and Road infrastructure (BRI) project. These countries include Pakistan, Argentina, Kenya and Turkey.

According to data website Statista, at the end of 2021, of the 98 countries for whom data was available, Pakistan owed $27.4 billion of external debt to China, Angola $22.0 billion and Ethiopia $7.4 billion. Several countries including Kenya, Djibouti, Angola, Maldives, Laos and Sri Lanka are among the countries which have received Chinese loans.

The Committee for the Abolition of Illegitimate Debt (CadTM) said between July 2021 and March 2022, over 80 per cent of Pakistan's bilateral debt service went to Beijing.