The United States has expressed concern about the debt owed by Pakistan to China, said US State Department Derek Chollet; reported by Reuters.
During a visit to Islamabad, Chollet acknowledged that Pakistan has become increasingly close to China, which has provided billions of dollars in loans to Islamabad, making China Pakistan’s largest creditor.
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As a result, Pakistan now faces an economic crisis, with decades-high inflation and critically low foreign exchange reserves depleted by continued debt repayment obligations.
Chollet emphasized that the US has been clear about its concerns about Chinese debt, not just in Pakistan, but elsewhere around the world.
According to a report by the International Monetary Fund released in September 2022, China and Chinese commercial banks hold about 30% of Pakistan’s total external debt of about $100 billion, much of which has been acquired through the China-Pakistan Economic Corridor as part of Beijing’s Belt and Road Initiative.
“We have been very clear about our concerns not just here in Pakistan, but elsewhere all around the world about Chinese debt, or debt owed to China,” Chollet said.
He added that while the US is talking to Islamabad about the “perils” of a closer relationship with Beijing, they would not ask Pakistan to choose between the United States and China.
The official also said the US is working with Pakistan to navigate through the current crisis.
This comes as officials from China and the United States prepare to be part of a multi-country meeting of a new sovereign debt roundtable on Friday.
The G7 and multilateral lending institutions have long pushed for broad efforts to deliver debt relief to heavily indebted nations to help them avoid cuts in social services that could spur social unrest.
US Treasury Secretary Janet Yellen and other G7 officials see China, now the world’s largest sovereign creditor, as a key stumbling block in debt-relief efforts.
While Washington continues to work with Pakistan to resolve its debt crisis, officials will continue to watch carefully as Pakistan seeks to manage its relationship with China and navigate the complex world of international finance.
