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BEIJING, August 13: Pakistan has been guaranteed financial backing from People’s Republic of China as the incoming Imran Khan-led Pakistan Tehreek-e-Insaf government looks to avoid going to the IMF to stablisie foreign exchange reserves, the Financial Times reported.
PTI leaders have been told by Chinese government that they will get further loans from Beijing over the coming months as one way to keep their currency stocks topped up. “Chinese state-backed banks have lent Pakistan more than $5bn in the past financial year as Islamabad has become increasingly reliant on its northern neighbour to secure its finances,” said a report published in the Financial Times.
One prospective cabinet minister told the FT: “China has promised to continue helping Pakistan overcome the crunch on foreign payments.” Another senior party leader said: “The Chinese have signalled their intent to keep helping Pakistan avoid a crisis, a default.” But he added that Chinese officials have urged their Pakistani counterparts “to take steps to reduce the large deficit”.
Prime Minister-elect Imran Khan’s first tasks is expected to be repairing the country’s balance of payments problem, with high imports and low exports having left it with only $10.4bn in foreign currency.
Officials have drawn up plans for the new government to approach the IMF for a bailout worth up to $12bn, which would be Pakistan’s 13th bailout from the fund and its largest ever.
The US, the IMF’s biggest shareholder, has urged the fund not to issue a loan unless Islamabad publishes full details of the loans it has taken from China to pay for a $60bn infrastructure scheme.
With Islamabad and Beijing reluctant to reveal loan details, officials in the Pakistani government have begun to explore other sources of funding.
Asad Umar, the expected finance minister, said turning to the IMF as a “fallback option”, to be sought once other routes had been explored.
One finance ministry official told the FT: “Clearly, we mustn’t put all our eggs in the IMF basket. At least for the sake of argument, our future plans should also include a back-up which is built on Chinese money.”
Beijing has not told Islamabad how much it might be willing to lend, or whether it will be enough to avoid an IMF bailout. But Mr Umar told reporters last week the Chinese ambassador to Pakistan had given the incoming government “his assurance that China is a friend that Pakistan can count on”.
Meanwhile, Saudi Arabia’s King Salman bin Abdulaziz called PM-in-waiting Imran Khan and congratulated him on his party’s victory in the July 25 elections.
The King told Imran that Pakistan was an important ally of Saudi Arabia and the kingdom wants a close relationship with the South Asian country.
Imran thanked King Salman and said Saudi Arabia has always supported Pakistan in its difficult times.
The PTI chairperson told King Salman that the protection of Harmain-Sharifain was part of Pakistani’s faith. He has also accepted King Salman’s offer to visit Saudi Arabia.
Few days back the Islamic Development Bank (IDB) has agreed to make a formal offer to lend Pakistan $4 billion when Imran takes over as the country’s prime minister, two officials told The Financial Times.
“The paperwork is all in place,” said one senior adviser in Islamabad. “The IDB is waiting for the elected government to take charge before giving their approval.”
The official said that the loan would not cover Pakistan’s expected financing gap of at least $25 billion during the financial year but was “an important contribution”.-Agencies
