Islamabad (Web Desk): Pakistan has been guaranteed financial backing from Beijing as the incoming Imran Khan-led government looks to avoid having to go to the IMF to solve its foreign exchange crisis, the Financial Times reported.
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.
A 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”.
Pakistan’s former cricket captain, is hoping to be sworn is as the country’s new prime minister within days following last month’s election, at which his party won the most seats. New MPs took their oaths on Monday, with the opposition Pakistan Muslim League-Nawaz and Pakistan People’s party promising to provide a unified opposition to Mr Khan’s PTI.
One of his first tasks will be to repair the country’s balance of payments problem, with high imports and low exports having left it with only $10.4bn in foreign currency, according to the latest published statistics — enough to cover two months’ worth of imports.
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.
But the US, which is the IMF’s biggest shareholder, has urged the fund not to issue a loan unless Pakistan 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. Last week the FT revealed that the Saudi-backed Islamic Development Bank has agreed in principle to lend Pakistan more than $4bn — though this will be insufficient to avoid further assistance.
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,” a finance ministry official said.
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”.