Positive signals
When Imran Khan took over the reins of the government, Pakistan’s economy was reportedly in tatters
When Imran Khan took over the reins of the government, Pakistan’s economy was reportedly in tatters. But it was a natural outcome of a decade-long mismanagement in every sphere of economic activity. Contrary to Khan’s earlier declarations of not compromising on the nation’s pride and the country’s sovereignty with a begging bowl, the government was probably left with no other choice but to approach the IMF to help Pakistan bail out with some relief to sustain the national economy.
However, it was not desirable to approach the IMF with empty coffers. It would have left Pakistan in a weak negotiating position. The government, therefore, decided to first seek help from some close allies, including Saudi Arabia, the UAE and China. Riyadh gave commitment for a six billion dollar relief package over a period of three years. The Saudis have already deposited one out of the first three billion dollars with the SBP to help immediately resolve the balance-of-payments crisis. According to reports, the UAE has also agreed to extend a package in assistance. There are positive signals from China as well. A report quoted Chinese Consul General Long Dingbin as telling the media on Sunday that Beijing, instead of hard cash, was going to provide multiple forms of bailout package to Pakistan. He referred to 15 new agreements signed between the two countries during Imran Khan’s visit early last month. According to the Chinese diplomats, these agreements would widen the scope of investment coming from China. With these bailout packages in the pipeline, Pakistan is definitely in a better position to negotiate with the IMF. It can now resist the tough conditions the Fund may offer as part of its assistance. But with a recent dip in the value of the rupee against the dollar, it is unlikely to give much respite to Pakistan’s economic managers who might be compelled to take some unpopular decisions to set the economy on a stable path.
Published in The Express Tribune, December 4th, 2018.
However, it was not desirable to approach the IMF with empty coffers. It would have left Pakistan in a weak negotiating position. The government, therefore, decided to first seek help from some close allies, including Saudi Arabia, the UAE and China. Riyadh gave commitment for a six billion dollar relief package over a period of three years. The Saudis have already deposited one out of the first three billion dollars with the SBP to help immediately resolve the balance-of-payments crisis. According to reports, the UAE has also agreed to extend a package in assistance. There are positive signals from China as well. A report quoted Chinese Consul General Long Dingbin as telling the media on Sunday that Beijing, instead of hard cash, was going to provide multiple forms of bailout package to Pakistan. He referred to 15 new agreements signed between the two countries during Imran Khan’s visit early last month. According to the Chinese diplomats, these agreements would widen the scope of investment coming from China. With these bailout packages in the pipeline, Pakistan is definitely in a better position to negotiate with the IMF. It can now resist the tough conditions the Fund may offer as part of its assistance. But with a recent dip in the value of the rupee against the dollar, it is unlikely to give much respite to Pakistan’s economic managers who might be compelled to take some unpopular decisions to set the economy on a stable path.
Published in The Express Tribune, December 4th, 2018.