IMF: Pakistan’s economy now depends on Gulf states to bail out crisis

Pakistani economy economic crisis Shehbaz Sharif

The IMF's condition that Pakistan secure confirmation from bilateral partners of the Gulf region to bridge the gap of USD 6 billion is simply an attempt to ensure its credibility. Non-materialisation may result in Islamabad sliding into default, The News International reported.

The wrote a top official that now, all eyes are on Saudi Arabia, the UAE and Qatar to bail out the struggling economy of Pakistan. There is no other game plan than to wait and pray for getting confirmation from bilateral partners from the Gulf region.

The IMF review mission was forced to put forth this condition because representatives of these countries are on the Executive Board of the IMF. They made commitments on the approval of the 7th and 8th Reviews held last August for providing financial assistance to Islamabad in different forms.

These include additional deposits and investments. But they failed to materialise their commitments through several months in the current fiscal year have passed.

“In such a scenario, the IMF has placed the ball in Pakistan’s court for securing 100 per cent commitment from bilateral partners before moving towards the signing of Staff Level Agreement (SLA),” top official sources confirmed while talking to The News on Thursday.

The IMF conveyed to Islamabad its credibility would also be at stake if the staff-level agreement is struck and even the IMF board revives the stalled programme. But in case of non-materialisation of commitment from the bilateral partners, it might slide the country into the default zone, The reported.

The IMF high-ups argued there was a need to ascertain reasons why these bilateral partners could not fulfil their earlier commitments. In such circumstances, the nod of Saudi Arabia, the UAE and Qatar can only help Islamabad in striking a staff-level agreement, The wrote quoting official sources.

Only China had come forward to rescue Islamabad by fulfilling its commitments on the re-financing of its commercial loans as well as on the rollover of its Simple Agreement for Future Equity (SAFE) deposits. Pakistan had made a request to roll over SAFE deposits of USD 2 billion that would mature next week.

Meanwhile, Minister for Finance Ishaq Dar said Thursday that documentation for the disbursement of a USD 500 million commercial loan from the ICBC (Industrial and Commercial Bank of China) had been completed for the release of funds.

“Out of Chinese ICBC’s approved rollover facility of USD 1.3 billion (which was earlier repaid by Pakistan in recent months), documentation for second disbursement of USD 500 million has been completed by the Finance Ministry for release of funds to the State Bank of Pakistan,” Minister for Finance Ishaq Dar tweeted on Thursday.

Chinese commercial banks, including China Development Bank (CDB) and ICBC, had already re-financed commercial loans of USD 700 million and USD 500 million respectively in the recent past.

Now, another instalment of USD 500 million will be re-financed either on Friday (today) or next week. After getting a re-financing of USD 500 million from the ICBC soon, there will be total re-financed commercial loans of USD 1.7 billion, The reported.

There was a total of USD 2 billion in commercial loans which were repaid by Pakistan a few months back, and there was a commitment from China its commercial banks would re-finance its loans. “Now it is expected the last instalment of USD 300 million commercial loans from the ICBC will be re-financed in the coming weeks,” said the official sources.

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