Prime Minister Imran Khan on Sunday said that Pakistan might need to eventually ask the International Monetary Fund (IMF) to help its mounting balance of payments crisis.
“We may go to IMF for a loan to handle the country’s financial issues, but, first we will try to get assistance from other countries as we have requested three countries to deposit money in Pakistan’s State Bank that would help boost national reserves.” The PM said.
It is widely believed that the countries Pakistan approached are Saudi Arabia, UAE and China. The IMF concluded a consultative visit last week with a warning that Pakistan needed to quickly secure “significant external financing” to stave off a crisis. None of Pakistan’s allies including all weather friend China and long term ally Saudi Arabia have offered emergency assistance despite high-level visits of officials from both nations.
Any IMF bailout would likely include conditions to curb government spending, threatening Khan’s campaign promise to build an Islamic welfare state.
The CPEC projects in Pakistan have drained country’s resources and currency reserves. Under the terms of agreements while CPEC was originally paid by China as a loan to Pakistan, the money went to Chinese contractors and manufacturers adding little to local economy. Now that Pakistan has started servicing the loan, the excessive terms have been biting it really bad. As per Financial times – Abdul Razak Dawood, Advisor for Commerce, Textile, Industry and Production, and Investment of Pakistan, said that “The previous government did a bad job negotiating with China on CPEC — they didn’t do their homework correctly and didn’t negotiate correctly so they gave away a lot.”
PM Khan however blamed the previous government for the economic situation. “Pakistan is suffering huge internal and external debt … caused by corruption of the former rulers,” he said, avoiding any reference to China or to CPEC
