And on the kindness of friends
Pakistan’s effective foreign exchange resources are down to US$3 billion—sufficient to cover about a month’s worth of essential imports. And other than a tranche of US$500m from the Asian Development Bank, it has received few firm promises. After Standard & Poor’s cut the country’s sovereign long-term foreign-currency rating to CCC+, with a negative outlook, it has become “the world’s riskiest borrower according to credit-default swap prices from CMA Datavision.”
The Friends of Pakistan, perhaps too preoccupied with the global financial crisis, have postponed this month’s scheduled meeting. Pakistan is sending a team to the United States, seeking US$10 billion of emergency assistance—at a particularly inopportune time. Even the Saudis—Pakistan’s traditional bailors—have stalled announcing the US$6 billion oil credit facility. The Saudis are very likely trying to teach the PPP government a lesson (even as they remain thick with Nawaz Sharif). There are no reports of China providing direct financial assistance. It is a member of the Friends of Pakistan group, and might lend through that channel.
The Pakistani government is attempting measures like securitising future remittances, but given its credit rating and the mood of the global financial markets, the success and the efficacy of such moes is likely to be limited. That leaves approaching the International Monetary Fund. But an IMF loan will come with the condition of an “intensive economic reform programme”. In Pakistan’s current political climate, trying to implement the kind of programme that the IMF will demand is a recipe for disaster.