Pakistan’s hopes of reviving the $6.5 billion financial assistance package from the International Monetary Fund (IMF) are rapidly diminishing. Islamabad has now once again reached out to its “iron brother” China for the much needed help. The cash starved Pakistan may also seek approval for a debt restructuring programme with its bilateral creditors.
While Islamabad will have to make a debt repayment of $300 million to the Bank of China in the next couple of months, its foreign exchange reserves are now at $3.9 billion. Another $1 billion would be due for repayment to China Development Bank within three weeks.
According to Express Tribune, Pakistan has requested China to fast-track the refinancing of maturing commercial loans of $1.3 billion and even “apprised it of the diminishing prospects of revival of the IMF loan programme.”
It is to be seen how much help Pakistan receives from China, which is also battling an economic slowdown.
“Though China would not want Pakistan to crumble as its larger aim is to keep India in check, it will be interesting to see how much assistance it is willing to give Islamabad..it has rolled over loans in the past but to what extent Beijing is ready to further assist Pakistan is something one would be keen to see,” an analyst told India Narrative.
Amid dwindling hopes of IMF reviving the loan programme, Pakistan’s Finance Minister Ishaq Dar lashed out at the multilateral lender last week while presenting the country’s Economic Survey.
He said that the IMF’s prescription of currency depreciation has led to imported inflation. “Devaluation is the mother of all economic problems,” he said, adding that the Pakistani rupee was artificially undervalued and the issue needed to be resolved.
Even as Dar repeatedly assured investors and the business community that the country will not default, many at this point are unwilling to buy his theory, especially as the political uncertainty at home deepens.
“We should give hope to the people that Pakistan will come out of this crisis and there is no need to panic about the possibility of default,” he said at an event.
Pakistan is in the middle of the of the worst economic crises since its independence.
For Pakistan, the new financial year which begins next month is not likely to be any better even if it manages to arrange for financial assistance from other countries. At most it will be able to diffuse the immediate problem at hand but the inherent structural challenges will continue to nag the South Asian nation if bold structural reforms are not put in place.
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