Pakistan has approached China for an additional 10 billion yuan (roughly $1.4 billion) loan, as reported by The Express Tribune. This request follows Pakistan’s complete utilization of an existing 30 billion yuan ($4.3 billion) Chinese trade finance facility, part of a currency swap arrangement between the two nations.

Why is Pakistan requesting an increased loan limit?

Pakistan's Finance Minister, Muhammad Aurangzeb, met with Liao Min, China's Vice Minister of Finance, on the sidelines of recent IMF and World Bank meetings in Washington to discuss financial difficulties facing the country. Aurangzeb is urging China to raise the limit on the existing currency swap agreement to 40 billion yuan ($5.7 billion), which would give Islamabad a much-needed breathing space for its finances.

This request comes soon after China extended the current 30 billion yuan facility for three more years, offering Pakistan a lifeline amid growing economic pressure. While visiting China, Pakistani President Xi Jinping and the Premier Li Qiang had recently inked an agreement, with which Pakistan extended the date of debt repayment until 2027, enabling deferring payments.

Did China ever agree to Pakistan's past demands?

This is not Pakistan’s first appeal for an increased debt limit, but China has refused such requests in the past. With the Pakistani economy under severe pressure, the country has entirely utilized its original 30 billion yuan trade finance facility to roll over to pay off the earlier loans.

China has been the biggest source of economic aid to Pakistan in stabilizing its economy, and any more from Beijing remains a mystery.

Pakistan and China relation

Pakistan and China have continued to enjoy a close but complicated relationship, with the China-Pakistan Economic Corridor (CPEC) at the center, involving more than $65 billion in Chinese investment. However, security has become a major issue, with recent attacks on Chinese nationals in Pakistan. China has always pushed Pakistan to enhance security measures to protect not only Chinese investments but also Chinese citizens, with the security situation in Balochistan being a critical concern.

The economies of both are highly interdependent. They are now discussing an increase in currency swap limit up to 40 billion yuan to strengthen strategic cooperation between them and solidify economic cooperation. With economic, military, as well as diplomatic relations, the partnership between both reflects strong commitment towards regional stability as well as development yet their response towards security concerns from Pakistan would determine their futures.