Chinese money

Prime Minister Imran Khan’s trip to China last week had one overarching aim: to secure an emergency bailout on easy terms so that Pakistan would not be forced into taking a $10-12 billion loan from the IMF. As Pakistan’s closest ally, China did not outright refuse its request but it appears as if hopes of the Chinese coming to the rescue were overly optimistic. Following the prime minister’s visit to China, the secretaries of commerce, finance and foreign affairs and the State Bank of Pakistan governor all went to the Chinese to seek aid. They seem to have now returned empty-handed. Apparently, China has told Pakistan that the best way to raise money is by increasing exports. This, of course, was the entire point of the China-Pakistan Economic Corridor. The increase in Pakistan’s import bill necessitated by the purchase of capital goods from China was meant to spark a massive increase in our exports. That has not happened yet, largely because many of the CPEC projects are not yet complete. For China to suggest increasing exports is essentially a snub since it knows that is exactly what Pakistan is trying to do but has been unsuccessful so far.

China is not putting its refusal to give us immediate aid as a snub. In fact, Lijian Zhao, the deputy head of mission at the Chinese Embassy, has said that China will give Pakistan a financial support package that will be bigger than the one extended by Saudi Arabia. According to him, commercial banks in China are in the process of setting up credit lines for their Pakistani counterparts. Upon his return from China, PM Imran Khan too had said that China had given us a “big” aid package but refused to give any details.

The problem though is that Pakistan needs the money soon as our foreign currency reserves are dwindling and China appears to be dragging its feet. This could end up having an impact on our foreign policy. The US has an outsized voice at the IMF and going to it for an emergency loan will allow the Trump administration to make demands of us. The Americans have already said that they do not want any IMF funds to be used to repay China for loans that will be coming due. The last thing Pakistan needs right now is to be caught in a battle between the US and China. The two countries are currently fighting a trade war and will think nothing of using Pakistan to get back at the other. This is why it is essential that we not be dependent on any one country, and finally get around to instituting the fiscal reforms that will allow us to stand on our own two feet.