The ongoing political turmoil in Pakistan will make it even more difficult for the Shehbaz Sharif government to secure the much needed multilateral and bilateral loans. The inflow of foreign loans into crisis hit Pakistan has significantly shrunk between July and April amid uncertainty over the revival of the $6.5 billion bailout package by the International Monetary Fund (IMF).
Pakistan’s financial year commences from July. Foreign loan disbursements for the 10-month period amounted to $8 billion, reflecting a $4.8 billion or 38 per cent decrease compared to the same period last fiscal year, the Express Tribune reported.
Staring at a default, Islamabad urgently needs financial assistance to avert a default.
The foreign exchange reserves held by the State Bank of Pakistan on May 12 fell to $4.31 billion from $4.38 billion held on May 5.
Global ratings agency Moody’s has warned that Pakistan may default it if fails to receive the IMF loan. The country has to make a repayment of $73 billion by 2025. However, the immediate repayment requirement is to the tune of $3.7 billion. Pakistan will have to repay this amount by this month end and June to avert an official default.
Though China has recently rolled a small chunk of its loans providing Pakistan some relief, most other bilateral lenders including Saudi Arabia have been unwilling to lend any further to Islamabad in the wake of the ongoing impasse with the IMF.
Pakistan’s local news organisation Samaa said that this change in attitude could have far-reaching implications for Pakistan’s economy since the country is heavily reliant on foreign aid and loans to keep its economy afloat. “With Saudi Arabia taking a more assertive stance in its leadership, it appears that the days of blank checks are over,” it said.
In March, China rolled over a $2 billion loan. Thereafter, the Industrial and Commercial Bank of China Limited approved another assistance of $1.3-billion. An analyst told India Narrative that while China has provided “some help” it is not in any position to pull Pakistan out of danger.
The IMF and other bilateral lenders are now pressing for aggressive economic reforms within Pakistan before they open their purse strings.
Earlier Pakistan Prime Minister Shehbaz Sharif said, “Even friendly nations think we’re beggars,’ is telling. “Today, when we go to any friendly country or make a phone call, they think that we have come to beg for money,” he had said.
Also read: Why China may not lift ‘iron-brother’ Pakistan out of its economic mess