Beijing’s Financial Lifeline to Islamabad Fuels Economic Survival and Strategic Vulnerabilities

Pakistan’s economic stability is increasingly reliant on China’s continued rollover of loans, with debt repayments to Beijing set to reach record levels this year. Analysts warn that this growing dependence could undermine Islamabad’s self-reliance and expose it to geopolitical vulnerabilities.

In March, Pakistan repaid a $1 billion loan to the Industrial and Commercial Bank of China in two tranches of $500 million. According to officials, Beijing is expected to relend the full amount, Nikkei Asia reported.

World Bank data shows that Pakistan must repay $7.2 billion to China in 2025, with $5 billion due by June. This includes principal and interest on various loans, making it the country’s highest annual repayment to China on record.

Despite these obligations, Pakistan’s foreign reserves have fallen to a six-month low of $10.6 billion—barely covering two months of imports—following the recent $1 billion repayment.

A senior Pakistani official, speaking on condition of anonymity, told Nikkei Asia that China has rolled over around $15 billion in the past two years. These include commercial loans, cash deposits, and trade financing, helping China maintain its status as Pakistan’s largest creditor. According to the World Bank, Pakistan owes China $29 billion—22% of its total external debt.

Experts say that Chinese loan rollovers are critical to Pakistan’s financial survival. “Since 2023, timely loan rollovers from China have been vital in helping Pakistan avoid default,” said Naafey Sardar, an economics professor at St. Olaf College in the U.S.

Muhammad Shoaib, a postdoctoral fellow at George Mason University, added, “Chinese loans are as essential as IMF programs for Pakistan’s economy. No IMF deal can be reached without considering Pakistan’s debt to China.”

Despite the short-term relief, economists caution that constant reliance on rollovers undermines Pakistan’s credibility with international lenders and raises concerns over long-term debt sustainability.

Furthermore, there are security and geopolitical concerns. With over 20,000 Chinese nationals working in Pakistan—many on Belt and Road Initiative projects—there have been rising demands from Beijing to allow Chinese security personnel in the country. Since 2021, 20 Chinese citizens have been killed and 34 injured in 14 separate attacks, according to Pakistan’s National Counter Terrorism Authority.

Islamabad has so far resisted China’s request to deploy its own security forces, instead emphasizing bilateral cooperation. “It is our commitment to ensure the safety of Chinese personnel,” said Foreign Ministry spokesperson Shafqat Ali Khan.

However, Shoaib warned that continued financial pressure may leave Islamabad with limited options: “China could use its financial leverage to push Pakistan into accepting security arrangements that it has long resisted.”

Sardar added that allowing Chinese forces on Pakistani soil would carry “significant geopolitical risks,” potentially straining relations with the U.S. and Western allies.