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June 26, 2019

Help from Qatar


June 26, 2019

Pakistan has found another friend in Qatar. The visit of Qatari Emir Sheikh Tamim bin Hamad al-Thani brought good tidings after Qatar agreed to provide Pakistan another $3 billion bailout package. There is little doubt that Pakistan has done well to secure loans from friendly countries, including UAE, Saudi Arabia and China. The Qatari aid is good news for Pakistan’s fiscal managers in the short term; we will receive the amount in deposits and direct investments from the oil-rich kingdom. The exact division is not clear yet as the finance ministry has not yet provide a break-up of the investment. However, this will mean that the SBP will have a deeper cushion available to avert a balance of payments crisis. What is unclear is what the long-term cost for Pakistan will be of securing loans from friendly counties. Moreover, we need to see if there is any cost of turning to Qatar; there had been suggestions that the UAE had withheld around $1 billion after PM Imran Khan visited Qatar this year.

A powerful country would be able to play international rivals off each other; one would then ask: is Pakistan in a strong position to dictate the terms of receiving aid and investment? Qatar is important to Pakistan as a source of gas, but also increasingly as a source of cash and investment. There has also been some news regarding Qatar being ready to provide employment to around 100,000 Pakistanis.

Pakistan’s ability to meander through the tense waters of the Gulf will be put to the test by its latest agreement with Qatar. Officially, Pakistan has done little to improve its foreign exchange reserves despite major inflows of cash and devaluation. Instead of improving Pakistan’s fiscal position, this is likely to become a record year for foreign borrowings. Special Assistant on Information Firdous Ashiq Awan praised the government for prioritising national ties, over personal interests, in a dig at former PM Nawaz Sharif, but what is more important is that the government explain how it plans to juggle the fault lines in the Gulf. Pakistan’s own domestic vulnerabilities might mean it will need to choose sides. The UAE and Saudi Arabia might have been available without Qatar in the picture, but the real question is will they be alright with our new friends? And, if not, how will the government deal with that situation? There is no doubt that Pakistan is served best from a position of neutrality, which makes the Qatar deal a positive. But we will need to see if neutrality will come at a cost.

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