After traveling to both Saudi Arabia and China and stating that Pakistan had no option as it needed help, it appears as though neither of Pakistan’s “deepest” and “closest” friends are going to bail out Pakistan. What is also becoming apparent is that this time round Pakistan will not find it easy to get an International Monetary Fund (IMF) bailout.
According to news stories, “After almost two weeks of discussions between Pakistani Finance Ministry officials and the IMF, the talks ended inconclusively on Tuesday. The two sides did resolve to carry on the process, hoping to finalize a deal sometime early next year.”
The failure to reach an agreement “partly stemmed from the IMF’s insistence that Pakistan fully disclose the terms of loans extended under China’s Belt and Road Initiative, according to a Pakistani government official. Beijing plans to invest more than $60 billion in the China Pakistan Economic Corridor, a flagship Belt and Road project. The U.S.-led multilateral lender’s demand for full disclosure comes at an awkward time for Pakistan and China. The U.S. has criticized Chinese President Xi Jinping’s government for engaging in “debt-trap diplomacy” through the Belt and Road, leaving borrowers overextended and beholden to Beijing.”
Further, the IMF, “is seeking a devaluation of the Pakistani rupee as well as an increase in domestic electricity and gas tariffs, the official said. These measures are intended to reduce Pakistan’s fiscal deficit. “The IMF’s demands are tough and will eventually be unpopular with the Pakistani public,” he added.”
In a recent news story a Pakistani government official asserted: “It is very clear to us that the Americans are positioning themselves to use the IMF for pressing Pakistan for a full disclosure of conditions tied to Chinese loans. Everyone should recognize Pakistan has no shortage of friends. Our [liquid foreign currency] reserves give us a cover on imports for at least two months and we can request help from other friends, too.”
While Pakistani government is displaying false bravado and asserting that it is confident that Pakistan’s friends – from Saudi Arabia to China and others – to help the country this will not change the reality. If Pakistan needs to re-establish its credibility in global markets it will need to sign a new IMF program. “There will have to be an IMF program. There’s no doubt about that,” said Muhammad Suhail of Karachi’s Topline Securities. “Without an IMF program, loans from other multilateral institutions — like the World Bank and the Asian Development Bank — will not come, and even bonds [will be difficult to issue].”