But will there be a charge for this assistance, or is it just a buddy who needs it? China is Pakistan’s biggest creditor and also holds over 30% of its foreign debt. Pakistan’s condition was deteriorating as only three weeks’ worth of foreign exchange reserves were left by February.
Source: Hindustan Times
Interest rates on Chinese loans have always been high. The interest rates on the Chinese loans are 4%, which is about four times higher than those of other international lending institutions. Thus, it will be challenging for the nations to continue repayment. Why smaller countries still consider Beijing an option is the query that is more troubling. The difficulties with payments and defaults are well-known and plain to see. China is one of the major investors in many projects across South Asia.
South Asia is currently a key strategic region for Beijing. China is eager to establish a stronghold in the area and will do it by opposing the influence of both India and the United States. China has been willing to assist the smaller countries that frequently struggle to adhere to the criteria and guidelines of the IMF and other international loan organizations. China has taken the initiative to grant loans without any conditions or queries, which has made them appealing lenders for the smaller countries.
Source: Path Finder
Despite having one of the greatest economies and democracies in the region, New Delhi is unable to offset Beijing’s influence and offer a loan-on-loan alternative. In addition to its local demands and development requirements, India does not have the same access to resources as China.
Beijing will have unparalleled sway over Pakistan and acquire a significant geopolitical edge that will directly impact India. China will use Pakistan to counteract India’s influence in the South Asian area if it has more clout, and it will thwart New Delhi’s efforts to improve relations with Islamabad. Beijing benefits from a geopolitically unstable India, and this loan is a crucial step in that direction.
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