PM Khan Gets a $12Bln Bailout From China, Saudi Arabia –With IMF Card Still On the Table
Observers expect an uptick in the stock market index which after a straight 9-day climb up of 4290 points lost nearly 1000 points in the last two days amid some media reports that China bailout was not a done deal.
ISLAMABAD (Nov 6, 2018): In less than a month, the country’s two most trusted friends and allies–Saudi Arabia and China have placed $12 billion financial bailout program to Pakistan which is immediately needed to take the balance of payment crisis head on.
Finance Minister Asad Umar while addressing a presser on Tuesday said Pakistan’s “balance of payment crisis is over” as Foreign Minister Shah Mehmood Qureshi separately said the trip to China was “productive to the extent that we are out of the woods”.
Umar assured that China is committed to providing short-term relief to Pakistan — the modalities of which he said will be discussed in a new round of discussions in Beijing on Friday November 9 — the day the IMF team arrives in Islamabad to discuss and negotiate additional bailout program going forward–an option still very much on the table for the newly-formed government which has inherited a huge financial and economic crisis according to some observers.
Pakistan needed such commitments from its two most friendly allies prior to sitting down with the IMF for short-term to medium-term loan, experts say. “But an immediate bailout with a $12 billion infusion was a much needed shot-in-the arm”.
“So this curiosity that the people have will also be resolved soon. We had told you about the $12bn financing gap, of which $6bn have come from Saudi Arabia, and the rest has come from China (as reported here on Nov. 4) so the immediate balance of payment crisis of Pakistan has ended. I want to make that clear in unequivocal terms. We do not have any balance of payment crisis now,” the Finance Minister said who was part of the Prime Minister Imran Khan-led delegation that visited China recently. “In this regard, we have received a commitment from the highest level”.
But Pakistan must also look towards other sources for help as well, said Cheng Xiaohe, deputy director of the center for international strategic studies at Renmin University, according to SCMP.
“Pakistan must seek all kinds of assistance”, Xiaohe said, as the country has stacked up almost $95 billion in debt which includes accumulated interests and loans.
The international community has been sounding off alarm bells with the most vociferous statement coming from no other country than the US dubbing the ongoing China-Pakistan Economic Corridor as the biggest reason for Pakistan’s financial crisis.
In an interview with CNBC televisionin July , Pompeo said the United States looked forward to engagement with the government of Pakistan’s expected new prime minister, Imran Khan, but said there was “no rationale” for a bailout that pays off Chinese loans to Pakistan.
“Make no mistake. We will be watching what the IMF does,” Pompeo said. “There’s no rationale for IMF tax dollars, and associated with that American dollars that are part of the IMF funding, for those to go to bail out Chinese bondholders or China itself,” Pompeo said.
Apparently as a counterpoint meant to travel across the Atlantic, the foreign minister said the purpose of China visit was to “send a message to the international community” and also “move the two countries’ strategic relationship towards an economic partnership”.
Qureshi claimed that the trip also served to rubbish the notion that the Pak-China relationship would suffer under the PTI government.
“The perception that some people here tried to give that the government was not paying attention to our relationship with China,” he said. “There is nothing to it. I can say that our relations with China are not just great but could get even better than before.”
“This visit helped us in moving our relationship towards an economic partnership. We have always had good strategic relations so our aim [this time] was to figure how to advance the economic footprint.”
The last 10 years have seen a continuous and significant deterioration in Pakistan’s debt sustainability, independent economists say, forcing the 60-days-old government to take on a firefighting mode and stabilize the country’s financial conditions before heading for long term plans and initiatives.
Observers expect an uptick in the stock market index which after a straight 9-day climb up of 4290 points lost nearly 1000 points in the last two days amid some media outlet reports suggesting China bailout was not a done deal and things were up in the air–it was though contradicted by the Chinese officials on social media.
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