Summary: China has again bailed out Pakistan as it has agreed to provide a $1.5 billion financing line to repay the $2 billion Saudi Arabia debt. Saudi Arabia has helped Pakistan on multiple occasions in the last 70 years of its existence and even a few years ago it had agreed to give billions in foreign currency. However, it seems that Pakistan wants to replace Saudi Arabia with China as the latter emerges as Pakistan’s principal economic and political supporter.
Pakistan has entered into a debt trap with China by slowly losing land, air, water and more and forsaking its sovereignty in the process. It has already given up India’s land which never belonged to it for CPEC. Unable to manage its economy, it is now completely dependent on China to bail it out. Instead of becoming a responsible nation, it is singing the dragon’s tune forgetting the help and support it got from Saudi Arabia on earlier occasions.
Those were the days when Pakistan was seen as “Saudi Arabia’s closest Muslim ally Nation in the World.” Relationship was close, friendly, especially from commercial, cultural, religious, political, and strategic perspectives. According to a Pew Research Center survey, Pakistanis hold the most favourable perception of Saudi Arabians in the world, with 9 of 10 respondents viewing Saudi Arabia favorably. There were around two million Pakistani workers in Saudi Arabia, the second largest migrant community sending remittances of 5.8 billion dollars back to Pakistan. Approximately 70,000 Pakistani servicemen serving in the Military of Saudi Arabia.
However this relationship of Pakistan and Saudi Arabia is getting strained with mutual suspicion and hate. It started when some Pakistani politicians and Gen. Mirza Aslam Beg, the then-chief of staff of the Pakistani army openly expressed support for Saddam Hussein’s regime in Iraq and its invasion of Kuwait. Recently Pakistan’s Foreign Minister Shah Mahmood Qureshi sharply criticised Riyadh’s unwillingness to support Pakistan and warned that Pakistan would turn to other Muslim countries for support.
In December 2019, Pakistani Prime Minister Imran Khan abruptly withdrew from a Malaysia-sponsored, high-level Islamic summit. He later admitted to Saudi Arabia’s concern that the summit would undermine the OIC and project the interests of Muslim-majority countries with which Saudi Arabia is at odds (such as Qatar and Turkey).
When the Pakistan economy was under shambles a few years ago, Saudi Arabia agreed to give Pakistan $3 billion in foreign currency support for a year and a further loan worth up to $3 billion in deferred payments for oil imports to help stave off a current account crisis. But Pakistan after taking all the help from the Saudi’s, is now changing the status quo in the relationship. Earlier, Pakistan was reprimanded by America for being a state sponsor of terrorism and the mutual ties hit a all time low. Now gradually the Saudis are following in America’s footsteps. Pakistan instead of mending its ways and becoming a responsible nation, is going for an all out show against America and Saudi Arabia by partnering with China. After all, China is the veto power at the UN. It helps Pakistan diplomatically much more than Saudi can.
However, it seems that Pakistan wants to replace Saudi Arabia with China as it believes China as its “all-weather Friend”. China has emerged as Pakistan’s principal economic and political supporter. China has become Pakistan’s largest supplier of arms and its third-largest trading partner. Recently, both countries have decided to cooperate in improving Pakistan’s civil nuclear power sector. China and Pakistan also share close military relations, with China supplying a range of modern armaments to the Pakistani defence forces. Chinese investment in Pakistani infrastructural expansion including the Pakistani deep-water port at Gwadar. Both countries have an ongoing free trade agreement.
According to China’s custom statistics the bilateral trade volume for the calendar year 2017 crossed the US$20 billion mark for the first time. In 2017 China’s exports to Pakistan grew by 5.9% to reach $18.25 billion whereas Pakistan’s exports to China fell by 4.1% to $1.83 billion. For Beijing, a strong Pakistan is an effective balancing force against its rival, India, in the subcontinent. Already, some analysts are suggesting that China is backing the Imran Khan administration on all policies.
When Pakistan’s diplomatic spat with the Saudis was unfolding in August, China immediately provided a $1 billion loan to Pakistan to return the funds demanded by Saudi Arabia. China has again bailed out Pakistan as it has agreed to provide a $1.5 billion financing line to repay the $2 billion Saudi Arabia debt. Pakistan is set to return the $1 billion on Monday and remaining $1 billion is due in January 2021. Reports show that China has not provided the loan from its State Administration of Foreign Exchange commonly known as SAFR deposits nor it has given a commercial loan to Islamabad. This time both the countries have agreed to increase the size of a 2011 bilateral Currency-Swap Agreement (CSA) by an additional 10 billion Chinese Yuan or around $1.5 billion. This has increased the size of the overall trade facility to 20 billion Chinese Yuan or $4.5 billion. The benefit of this arrangement will be that the additional $1.5 billion Chinese loan will not reflect on the book of the federal government and it will not be treated as part of Pakistan’s external public debt.
China has become Pakistan’s largest creditor for the past few years. The Saudi oil facility has already been suspended. The Pak government has also not been able to get the suspended $6 billion IMF programme restored, which is making it difficult for it to continue uninterrupted foreign inflows. China has provided financial assistance in the past to help Pakistan navigate some troubled times, and the China-Pakistan Economic Corridor, a multibillion-dollar assortment of infrastructure projects, continues to remain the flagship enterprise under China’s Belt and Road Initiative. With increased ties, observers feel that Pakistan’s economic future is now linked to China resulting in Imran Khan’s assertion of China being an ‘all-weather friend’.
It is true that Pakistan is entering into a debt trap with China by slowly losing land, air, water and more and forsaking its sovereignty in the process. It has already given up India’s land in the Sino-Pakistan Agreement (also known as the Sino-Pakistan Frontier Agreement and Sino-Pak Boundary Agreement) 1963 ceding over 1,942 square kilometres (750 sq mi) to China. It has also illegally recognized Chinese sovereignty over hundreds of square kilometers of land in Northern Kashmir and Ladakh. The agreement is not recognized as legal by India, as the entire region belongs to it. Pakistan with enmity against India wants to bury itself under the dragon. It has forgotten the help and the natural relations it had with Saudi Arabia. Instead of becoming a responsible nation, it is singing the dragon’s tune forgetting the help and support it got from Saudi Arabia on earlier occasions.
From being a terror sponsoring nation to becoming a country like the unruly North Korea, Pakistan is a just step away from becoming a lawless hermit kingdom drawn by the Chinese dragon. For now it’s …Saudi Out… China In!
M.AM.PhiL/(PhD SNU South Korea)
Aayush Pal 
Shobhil Shrivastava 
Dr. Niranjan B Poojar