Pakistan to decide on IMF or Chinese bailout by end of September - finance minister-in-waiting
Islamabad: Pakistan will decide on whether to seek a bailout from the International Monetary Fund or friendly nations such as China by the end of September, according to Asad Umar, the finance minister-in-waiting of the incoming government.
Umar’s Pakistan Tehreek-i-Insaf (PTI) party is due to be sworn in to government around the middle of August and will immediately face a brewing economic crisis, requiring Pakistan to seek outside help to reduce balance of payments pressures that could trigger a full-blown currency crisis.
Pakistan’s foreign exchange reserves have plummeted over the past year and have been kept afloat by lending from China, which has deepened economic and diplomatic ties after pledging $57 billion in separate infrastructure loans for Pakistan. The rupee currency has been devalued four times since December.
Umar said he needs to see the latest government figures before he can speculate on the size of any bailout package, which analysts expect to exceed $10 billion. However, he added “no option, including an IMF programme, can be ruled out”.
“We have to evaluate all options in parallel,” Umar, 56, told reporters in capital Islamabad. “By end of September, I should be able to sit here and tell you this is the way we are going.”
While the economy is growing at 5.8 percent, the fastest pace in 13 years, Pakistan’s current account deficit widened 43 percent to $18 billion in the fiscal year that ended on June 30. The fiscal deficit has ballooned to 6.8 percent of the economy.
Pakistani media reported that China lent Pakistan another $2 billion this month, pushing its total lending over the past year to around the same size as the last IMF rescue package for Pakistan, which was $6.7 billion in 2013.
Umar, a former chief executive of Engro, one of Pakistan’s biggest conglomerates, said he had met with the Chinese Ambassador to Pakistan but they did not discuss any sums about a rescue package. The Chinese Ambassador also met PTI leader Imran Khan.
Umar added that the incoming government has no plans to renegotiate any Chinese Belt and Road projects that have been criticised as too expensive, as going back on government guarantees could scare off foreign investors.
“There is no question of going back and re-opening those commitments,” Umar said.
In the past, historic ally Saudi Arabia has also come to Pakistan’s rescue with financial assistance but the scale of any bailout needed has left many analysts expecting the IMF to step in for what would be its 15th bailout of Pakistan since 1980.
Umar said his party was considering raising money in the international debt markets through a Sukuk offering and a diaspora bond of some sort.