Pakistan’s economy may have soared with a growth of 6 percent, a record high in 13 years, but that statistic provides a deceptive picture of the financial mess that Pakistan may see itself stuck in.

According to disclosures by officials and the finance ministry data reviewed by Reuters, lending to Pakistan by China and its banks is on track to hit $5bn in the fiscal year ending in June. Government sources have reported that Pakistan expects to obtain fresh Chinese loans worth $1-2 billion to help it avert a balance of payments crisis. This is in the aftermath of decreased US assistance and cut in funding due to the thawing relations between US and Pakistan. While Pakistan announced that the Trump-announced cut in US funding would not affect its functioning, our country has apparently felt the hit, seen by our increasing reliance on China.

The new Chinese loans are aimed to boost Pakistan’s sharply declining foreign currency reserves, which tumbled to $10.3bn last week from $16.4bn in May 2017. While increase in loans may be a momentary relief for our current reserves, loans serve steely consequences for Pakistan’s balance of payments, and already large deficit. The widening of our current account deficit makes it likely that after the elections, Islamabad will need its second International Monetary Fund (IMF) bailout since 2013, which could have its own set of damages.

Thus, the country is caught in a battle between its current account deficit and its sharply decreasing currency reserves. The collapse of the reserves is mainly due to the State bank’s efforts to maintain an artificially strong rupee over the past few years. The approach to fix the rupee rate could further bolster the deficit, as devaluation of the rupee can lead to an increase in exports.

It is not all a mess, however, and hope remains in the fact that Pakistan has enacted measures to increase its exports and decrease its imports. Government sources report that exports have shot up in the last two months and that should help ease the current account deficit. However, we face considerable hurdles here too, as CPEC requires Pakistan to purchase huge imports of Chinese machinery for projects, which cancel out any benefits of increased exports.

While loans from China may provide temporary breathing space for the State Bank, this cannot keep becoming a permanent relief for Pakistan, for the sake of its current account and its sovereignty.