China promises Pakistan economic aid but more talks needed

China will provide Pakistan with economic aid but more talks will take place to fix the details, a senior Chinese diplomat said, after new Pakistani Prime Minister Imran Khan met Chinese Premier Li Keqiang on Saturday.

Pakistan's foreign reserves have plunged 42 percent since the start of the year and now stand at about $8 billion, or less than two months of import cover.

Last month, Pakistan received a $6 billion rescue package from Saudi Arabia, but officials say it is not enough and the country still plans to seek a bailout from the International Monetary Fund (or IMF) to avert a balance of payments crisis.

It would be Pakistan's 13th rescue package from the multilateral lender since the late 1980s.

Speaking to reporters in Beijing's Great Hall of the People following Khan's talks with Li, Chinese Vice Foreign Minister Kong Xuanyou said his country would help.

"During the visit the two sides have made it clear in principle that the Chinese government will provide necessary support and assistance to Pakistan in tiding over the current economic difficulties," Kong said.

"As for specific measures to be taken, the relevant authorities of the two sides will have detailed discussions," he added, without giving details.

Khan told Chinese President Xi Jinping the previous day that he had inherited "a very difficult economic situation" at home.

Boost to infrastructure projects 

China also agreed to "firmly move forward" infrastructure projects in Pakistan, as the South Asian nation seeks to stave off a financial crisis with aid and investment from the world's second largest economy.

The agreement follows concerns that Islamabad's spiraling financial crisis could lead Beijing to scale back its projects in the country, where it is helping to build the multi-billion dollar China-Pakistan Economic Corridor (CPEC) –– which aims to increase energy and transport links between the western Chinese region of Xinjiang and the Arabian Sea.

The project is at the heart of Chinese President Xi Jinping's Belt and Road Initiative, an ambitious, globe-spanning trade and infrastructure programme.

The massive undertaking has drawn both praise and criticism from around the world, with some saying the initiative is filling a critical funding gap in the developing world, while others fear the Chinese loans financing the work are designed to entrap their recipients in debt.

'All-weather partners'

In Pakistan, Belt-and-Road-linked projects have come in for heavy criticism for their opaque lending terms, with some arguing that Beijing's largesse may worsen Islamabad's fiscal dilemma.

But both Pakistan and China played down those concerns on Saturday, describing the programme as a key part of Islamabad's recovery plans.

In his meeting with Li, Khan invited the Chinese premier to visit Pakistan and see for himself the difference the mega-project has made in the country.

"CPEC in 2013 was just an idea. Now it is on the ground. And it has caught the imagination of the people of Pakistan," he said.

"We feel that this a great opportunity for our country to progress, to attract investment. It gives us an opportunity to raise our standard of living, growth rate."

Li praised the relationship, saying "China and Pakistan are all-weather partners."

"Pakistan has always been regarded as a foreign policy priority by China."

Movement on CPEC

Following their talks, the two leaders oversaw the signing of 16 cooperation agreements, according to a Chinese vice foreign minister, Kong Xuanyou, who said the countries "will firmly move forward CPEC, while ensuring the smooth operation of completed projects, and advancing the ongoing projects."

Officials provided only a general list of the agreements, which appeared to be largely political, rather than economic.

Asked about future cooperation on infrastructure, Kong said "there's been no change in the number of CPEC projects," adding that "if there were to be any change, it would be an increase going forward."

"CPEC will be introduced to more areas of Pakistan and will also tilt in favour of areas relating to people’s lives."

'Low point'

Khan's meeting with Li follows talks with President Xi Jinping on Friday, where the former cricket star bemoaned his country's financial woes, saying the economy was at a "low point".

Since taking power in August, Khan has sought loans from "friendly" countries like Saudi Arabia, which has agreed to provide Pakistan $6 billion in funding.

His government has also entered talks with the IMF over a potential bailout as it grapples with a balance of payment crisis and current account deficit.

Pakistan has gone to the IMF repeatedly since the late 1980s.

The last time was in 2013, when Islamabad got a $6.6 billion loan to tackle a similar crisis.