Pakistan will go to friendly countries as well as the International Monetary Fund (IMF) for about $12 billion in financial help to avert a looming balance of payments crisis, Prime Minister Imran Khan has said.
His comments in a televised speech on October 10 suggested the government will approach both Saudi Arabia and China for loans alongside any assistance provided by the IMF. Beijing and Riyadh have provided Pakistan with financial assistance in the past.
Khan said Pakistan’s current account deficit is a record $18 billion while its foreign-exchange reserves dropped last month to $8.4 billion, which is barely enough to cover sovereign-debt payments due through the end of the year.
“We do not have enough dollars to pay the installments of our loans,” he said. “We debated and decided to go both the IMF and countries which are our friends.”
The former cricketer said Pakistan will need $10 billion-$12 billion assistance in all, but said that should not be “a major issue.”
“We will get out of this. I will take us out of this,” he said.
Khan described the $18 billion deficit as “a gift from the previous government.”
“I want to tell all of you to stay strong and not to panic. This is a very short period of time which will go away,” he said.
Khan, who took office in July, sought alternatives to what would be the second IMF bailout in five years because the IMF is expected to impose budgetary restraint, new taxes, and other tough conditions on the government in exchange for any loans. That could make it difficult for Khan to create the Islamic welfare state he has envisioned.
Khan had said his government would only go to the IMF for assistance as a last resort. But with a financial crunch looming, he instructed his finance ministry earlier this week to open negotiations with the IMF.
In an statement, IMF Managing Director Christine Lagarde said she met on October 11 with Pakistani Finance Minister Asad Umar and the governor of the country’s central bank, Tariq Bajwa, on the sidelines of a conference in Bali, Indonesia.
During the meeting, the Pakistani officials “requested financial assistance from the IMF to help address Pakistan’s economic challenges,” Lagarde added.
She also said that an IMF team will visit Islamabad in the coming weeks to “initiate discussions for a possible IMF-supported economic program.”
Meanwhile, in Islamabad, opposition lawmakers staged a sit-in on October 11 outside the parliament building, to protest against Khan’s decision to seek an IMF bailout.
After Umar announced Pakistan would seek an IMF bailout, on October 9 the Pakistani rupee plunged 7 percent in what many interpreted as a central bank devaluation — the country’s fifth devaluation since December.
This took total rupee losses since then to about 26 percent, a level of devaluation seen as a prerequisite for getting another IMF rescue package.
Khan has cultivated close ties with both Saudi Arabia and China. In his first official state visit, Khan and Umar flew to Saudi Arabia and the government later announced Riyadh would be investing in Chinese-funded development projects.
Beijing has pledged $60 billion to build infrastructure and energy projects to help turn Pakistan into a major overland route linking western China to the world.
Chinese Foreign Minister Wang Yi visited Islamabad last month to meet with Khan and reiterated that Chinese investment would help revitalize Pakistan’s economy.