China, Saudi Arabia and the United Arab Emirates refused loans to crisis-hit Pakistan and directed it to the IMF
Pakistan’s all-weather ally China, along with countries like Saudi Arabia and the United Arab Emirates (UAE), are cautious about disbursing loans to the crisis-hit nation, the agency reported. Bloomberg press.
Pakistani Finance Minister Miftah Ismail said last week that China, Saudi Arabia and the United Arab Emirates had urged Pakistan to speak with the International Monetary Fund (IMF) first. “We went to Saudi Arabia, Dubai and talked to other countries – they are ready to give money, but all say we have to go to the IMF first,” Ismail said as quoted by the Bloomberg news agency.
This is a new development in Pakistan’s relationship with each of the aforementioned nations. The Bloomberg report pointed out that in 2018 Pakistan got loans from China, the UAE and Saudi Arabia before going to the IMF, but this time the allies said that if the IMF lends , they would too.
A Bloomberg dashboard also revealed that Pakistan’s economic risk score is currently at its lowest level since 2009. Over the past year, Pakistan’s foreign exchange reserves have halved while the Pakistani rupee has fallen. nearly 8% in May. The Pakistani rupee is the worst performer in Asia, according to data collected by Bloomberg News.
The Chinese Asian Infrastructure Investment Bank, set up to compete with global lenders, also sided with the IMF, reiterating that if the latter agrees to lend, the China-based bank will follow.
Pakistani Finance Minister Ismail also said the country was locked out of the global bond market and commercial banks.
If the IMF agrees, other donors should also help Pakistan reach the target. If the funding materializes, Pakistan will have $15 billion in foreign exchange reserves in the next fiscal year, up from about $10 billion. Pakistan faces $3.2 billion in debt due in 2022.
Dollar bonds gained after the government raised fuel prices – a key requirement highlighted by the IMF in order to resume its lending program. Pakistan’s dollar bonds hit a record high in May. He pointed out that Pakistan needed at least $36 billion in funding for the fiscal year starting in June.
The $6 billion bailout package was blocked by Imran Khan, Pakistan’s former prime minister, after cutting and freezing fuel prices. To counter its effects, Prime Minister Shehbaz Sharif banned imports of luxury goods and Pakistan’s central bank raised borrowing costs more than expected in May to counter record high imports.
(with entries from Bloomberg)
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