Sweet rescue from the brink

The Saudi package will give Pakistan an excuse not to turn to the IMF for a bailout

For a country labouring under a severe balance-of- payments crisis like Pakistan is, the announcement that Saudi Arabia has agreed to provide an assistance package was a godsend and brought great cheer amidst tear-filled relief that produced giant lumps in the throats of grateful Pakistanis. The Saudi package will give us an excuse not to turn to the International Monetary Fund for a bailout — never a pain-free option anywhere as Pakistan discovered on the dozen or so occasions that its arms were outstretched in the direction of the Washington-based lender — for it resuscitated the country’s economy through a critical transfusion of $3 billion into the coffers. Foreign exchange reserves will in due course receive a swift and timely boost. There are more reasons to smile of course: Riyadh will supply oil worth $3 billion to Islamabad on deferred payments — a facility that will run over a three-year period — swelling the value of the package to $12 billion and dwarfing easily the amount that the country would have otherwise sought from the IMF.

The issue of deferred oil payments is not as complicated as it may seem to non-oil producers. Some years ago, the Saudis turned down our requests for oil on credit but that was another era and another party was in power in Pakistan, one that did not inspire much trust or confidence.

It is hard for Islamabad and other recipients of such facilities to comprehend Gulf-driven compulsions but we must respect the fact that despite oil export being a commercial business for Saudi Arabia as it is for other oil-based economies, Riyadh agreed nevertheless to extend the facility of deferred payments to Pakistan. The gratitude that Pakistanis feel is a natural outpouring of affection and brotherhood with the Kingdom. A decade ago, at the height of the international meltdown Pakistan managed to obtain a limited but still handy deferred payment plan from Kuwait.

The government may have successfully negotiated a major hurdle in the nightmarish steeple chase that our economic woes seem to resemble these days. There are a lot more dangerous curves ahead. So let us tread cautiously.

Published in The Express Tribune, October 25^th, 2018.

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