ISLAMABAD; Oct 28, 2018: China plans to provide an unspecified financial “grant” to Prime Minister Imran Khan’s nascent government while the United Arab Emirates is actively considering his government’s request for a fiscal relief package of up to $6 billion to help the country deal with a looming balance-of-payments crisis, reports VOA citing Chinese and Pakistani officials.
News report of the anticipated financial aid from China and UAE comes days after PM Khan secured more than $12 billion in financial support from the country’s close ally, Saudi Arabia for a period of three years, during an official visit to Riyadh.
The government urgently needs foreign currency to shore up its depleting reserves of less than $8 billion, which is barely enough for servicing its debt and paying import bills.
Khan’s government, which took office two months ago and has inherited a debt-ridden national economy, estimates the country urgently needs about $12 billion, and a 16 to 20 billion dollar financial band-aid over one year period to fulfill domestic and external liabilities.
PM Khan is to travel to Beijing Nov. 2-5 on his first official visit to the country, where he is scheduled to meet President Xi Jinping and his Chinese counterpart.
Chinese diplomats in Islamabad have announced ahead of the premier’s visit that it will result in “good news” in terms of securing financial assistance for Pakistan.
“During the visit of the prime minister, we will provide, hopefully, a grant to the Pakistani government. Please look forward to the outcome of this visit. There will be more good news to follow,” said Deputy Chinese Ambassador Lijian Zhao, when asked whether Beijing would provide Pakistan financial assistance similar to the package the Saudis have pledged. He declined to speculate on the size of the grant.
Earlier on Thursday, the Chinese envoy said he expects PM Khan’s first visit to Beijing to be a ‘historical event’ and China looks forward to partnering with the new government’s ‘Naya Pakistan’ vision.
If PM Khan’s government can succeed in its strategy of tapping China and UAE for financial assistance, in addition to Saudi package before going to the IMF for additional loans, it would be a big step, observers say.
Under the Saudi deal, Riyadh will deposit $3 billion in the coming days with the central State Bank of Pakistan for one year, as balance-of-payments support. Additionally, Saudi Arabia will export oil to Islamabad worth more than $3 billion on a one year deferred-payment basis over the next three years.
Federal Minister Haroon Sharif, chairman of the Board of Investment, said Saturday that the government had formally submitted a financial request to a visiting UAE delegation similar to what Saudis have pledged. The Gulf state, he noted, is one of the biggest oil suppliers to Pakistan.
The minister said the UAE delegation “positively” noted Islamabad’s request and promised to return with options in the next few days.
“It is expected to be a good package. I am unable to share the figures, but I think it would more or less be similar to the one Saudi Arabia has announced,” said Sharif, who accompanied PM Khan during his visit to Saudi Arabia and will be part of the delegation traveling to China.
In addition to pushing friendly countries to provide fiscal relief, Khan’s government has also turned to the International Monetary Fund to seek a bailout package. Formal talks are scheduled to begin in Islamabad on Nov. 7.
Analysts say the Saudi financial package and expected aid from both China and the UAE will most likely boost Pakistan’s negotiating position and may mean the country will require a smaller IMF arrangement concurrently or over the months ahead and possibly on better terms.
Seeking an IMF bailout first could have forced PM Khan’s government to accept a harsher albeit unpopular set of terms and conditions, analysts say.
U.S. officials have already cautioned the IMF about entering into an arrangement with Pakistan, citing CPEC loans as a main factor for the country’s debt crisis and suspecting the IMF money would be used to pay back China.
Islamabad and Beijing have vehemently rejected Washington’s assertions as “misplaced” and “irrelevant.” Both countries acknowledge Chinese loans under CPEC are just over 6 percent of Pakistan’s total domestic and external debts of about $95 billion.