Pakistan plans to seek financial assistance from China and Saudi Arabia to get out of the grave financial crisis it faces to bridge the country’s external account deficit ahead of budgetary proposals for the 2018-19 fiscal year.
A well-placed source in the Ministry of Finance told Asia Times that instead of approaching the International Monetary Funds (IMF) for a bailout, officials have proposed that the government ask wealthy friends such as China and Saudi Arabia to help Pakistan overcome its dire economic situation.
Prime Minister’s Adviser on Finance Miftah Ismail confirmed last week that the government contacted friendly countries for assistance to get the economy back on track at a time when preparations are already underway for budget proposals for the next fiscal year.
“If I am not wrong the country had to repay foreign loans worth US$6 billion by the 31st of March this year, which it could not do due to the external account deficit and fast depleting foreign-exchange reserves,” Imran Khan’s chief political advisor and a former Pakistan Tehrik-e-Insaaf (PTI) Punjab president, Ejaz Ahmed Chaudhary told Asia Times. Alluding to former finance minister Ishaq Dar, he said ‘Dar’s doctrine’ had landed the country in a serious debt trap, because “from July 2013 to the end of 2017, they contracted foreign loans worth $40 billion, which is now a huge burden on the economy,” Chaudhary claimed.
IMF ‘bailout would threaten Chinese Corridor’
“An IMF package would put the China-Pakistan Economic Corridor (CPEC) – a $60-billion lifeline – at stake because the IMF does not approve of the project in view of the poor health of the economy,” a source at the Finance Ministry said. He said economic managers were at their wit’s end on how to bridge the yawning resource gap in the external account and avoid going into default on repayment of the country’s debts.
The shortfall of over $14 billion in external resources, he said, needed to be bridged through financial contributions from China and Saudi Arabia and initial proposals had already been sent explaining that, the source at the ministry said.
“We expect $8 billion worth of ‘parking money’ [loans] from China, who have also been asked to allow payment of CPEC related import proceeds in Pakistani currency instead of US dollars to release pressure on the foreign exchange reserves of the country. The ministry also proposed imports of oil from Saudi Arabia on a deferred payment mechanism. The Saudis have extended this facility to Pakistan in the past and the government is hopeful that they will help the country again and keep cordial relations between our two countries.”
However, Dr Farrukh Saleem, an economist, financial analyst and industrialist based in Islamabad, told Asia Times, “It’s true that Pakistan is facing a widening gap in export/import portfolios but the country has enough foreign exchange reserves to foot the external payment of $4-5 billion as the State Bank and commercial banks’ reserves stand at $18 billion.”
He said default was a technical term and judging by its repayment capacity, Pakistan had not crossed the “red line” to get into default.
Dr Saleem said Pakistan needed $15-16 billion worth of support but the World Bank, Islamic Development Bank and bilateral credit from a consortium of donors would raise more than half – $9 billion. “We will be left with a shortfall of around $7-8 billion to bridge either through grants and assistance from friendly countries or from the IMF,” he said, adding that the country’s economy was, of course, passing through a difficult period.
China and Pakistan had signed a swap agreement, which could allow imports to be paid for with local currency. But the request for a huge loan of $8 billion for Pakistan’s Central Bank could be a tough one, as China has already been wary about the fate of its CPEC investment given political uncertainty in the country.
“China will have to meet Pakistan’s demand because if they refuse, Pakistan will approach the IMF for a bailout package and if that happened the smooth sailing of the CPEC would become extremely difficult – a scenario which Chinese would not like to see,” Chaudhary remarked. He said the ‘Chinese Corridor’ was a huge project but sadly, even members of the national parliament did not have widespread agreement on the mega-deal.
yes here you are right
Sam Genokapi: Sam, I don’t need to to masquerade as any body. ,least of all as Pakistani. I strongly believe qualities of humanity exist in all societies in clouding Pakistanis or tribal societies. But in Pak. The critical and bulk of people are intensely stupid nationalists . A Peaceful, and prosperous and friendly Pakistan is good for all – to neighbouring states and to itself and to itself from self-mutilation and self destruction.
Oh BtW , I don’t smoke canabis . By the way you write, perhaps you are high on Heroine or addicted to what only Allah Knows!
Ali Javed : Most of you Pak. "Intellectuals" who can read , write and use computers , I wonder ever read and think for yourself about historic events in Pakistan. You regurgitate what was rammed down your throats by your Military an other politicians. Have you read about the creation of Bangladesh and why? It won solid majority and was supposed to form govt. by Shekh Mujibur Rahman. West Panjabis declared Martial laws, and brutal terror was unleashed on not good enough Bengalees. Nearly 2 million were killed in East Pakistan and some 100,000 women were raped by West Punjabi murderous Army.
Later after 1971 war, some 93,000 men surrendered like bloody cowards and shipped to rot in camps in India.
So read about what happened in Pakistan before you spew pure rubbish and write about killing innocent So?
Start with Google search to get some facts into your head!
Sam Genokapi My views seems to be shared by former leader of Pakistan’s Inter-Services Intelligence, the ISI – Lieutenant-General, Asad Durrani. https://youtu.be/jWA66m9AL9s It seems the ISI too prefer China investments rather than US war.
The US has lost the Afghan war and Pakistan has lost a lot of life’s helping the US war on "terror". The US destabilize the region.
Why don’t Pakistan mortgage CEPC (Chinese Extended Paki Coridor) to China for 200 years.
Agree.
Sam Genokapi hahahaha y u people can’t absorb reality ????????
Asking for help isn’t begging dear. Yes we have corrupt politicians but we will recover soon. Our military is strong. Not like ur military killed 1000s of innocent people in kashmir….. shame on u. U r not in a position to be a moral judge.
Government is boasting that our country is on the rise but they raised/borrowed only funds for the betterment of their own lives and lives of their coming generations not for the poor masses of PAKISTAN.
So now Indians are the barbrains….
Perry stop masquerating as a westerner, are you not proud of being a Pakistani ? Asian economic tiger ………smoke some more cannibis.
improve your english ignorant one, it’s not borrowing to Pakistan but lending to Pakistan. Go ahead close the supply lines to USA if you have the guts to, and see Pakistan declared a state sponsor of terrorism.
It is a very sound move for requesting a loan from China. Pakistan is not a failed state , but is a nuclear power and very resilient and China can depend on it.
Do you make a living, btw, by being a anti-terrorism analyst! I am told there are too many experts!
Pakistan has shown itself to be a reliable friend of China over decades. So why shouldn’t China help! Few billions are like peanuts to China. As a long time security, Pakistan can lease a naval base for 99 years as others have done like Sri Lanka, Maldives, and one country in Middle East.
Completing the CPEC is very important to China as it would catapult Pakistan into an Asian Economic Tiger estimated to be one or two decades. China will also be befitted by this act of loaning to Pakistan.
Pakis have the same mentality as the people like Persians, Afghans, Uzbeks and other central Asian barbarians who used to raid the rich lands and temples of India for over a thousand years to make a quick buck. Making money on their own is an alien concept for these filthy Sullas. Now the Indian raid and pillage route has dried up, so they go with begging bowls to their masters in China and Saudi Barbaria.
China should consider borrowing this money to Pakistan. Pakistan is important for the “Silk Road”. Important there is demand that Pakistan improve their effort to fight corruption. Pakistan has suffered a lot due to the US invasion of Afghanistan and it has resulted in an increased terrorism problem.
US seem to have abandoned Pakistan and shower Pakistan with insults. Pakistan should consider stopping US supply lines through Pakistan due to the multiple drone strikes and other violations of Pakistan sovereignty.
Stop spreading misinformation… IMF has nothing to do with CPEC. Anyway, enjoy
https://www.techjuice.pk/china-pakistan-launch-remote-sensing-satellites-june/