Thursday May 23, 2024

All eyes on Gulf states to bail out Pak economy

By Mehtab Haider
March 17, 2023

ISLAMABAD: The IMF’s condition that Pakistan secure confirmation from bilateral partners of the Gulf region to bridge the gap of $6 billion is simply an attempt to ensure its credibility. Non-materialisation may result in Islamabad sliding into default.

Now, all eyes are at the Kingdom of Saudi Arabia (KSA), 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, said one top official.

The IMF review mission was forced to put forth this condition on the negotiating table mainly because representatives of these countries on the Executive Board of the IMF had made commitments on the occasion of the approval of 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 though 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 percent 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 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 KSA, the UAE and Qatar can only help Islamabad in striking a staff-level agreement, said the 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 SAFE deposits. Pakistan had made a request to roll over SAFE deposits of $2 billion that would mature next week.

Meanwhile, Minister for Finance Ishaq Dar said Thursday documentation for the disbursement of a $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 $1.3 billion (which was earlier repaid by Pakistan in recent months), documentation for second disbursement of $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 $700 million and $500 million respectively in the recent past. Now, another installment of $500 million will be re-financed either on Friday (today) or next week. After getting re-financing of $500 million from the ICBC soon, there will be total re-financed commercial loans of $1.7 billion.

There was a total of $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 installment of $300 million commercial loan from the ICBC will be re-financed in the coming weeks,” said the official sources.