Pakistan awaits a bailout

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.

7 thoughts on “Pakistan awaits a bailout”

  1. hardly a wonder! If Pak decides (and it should) to stop helping “freedom fights” in their neighbourhood, it probably will see through these difficult times all by itself. 🙂

  2. Way too much wet dreaming. Pakistan has many suitors because of its strategic utility. Saudis have bailed them out before at even shorter notice. The Chinese, the Americans etc., will always make sure that the State of Pakistan remains in state.

  3. History has shown us that economic downturns are ripe picking grounds for extremists (both left and right). I can only pray that Pakistan’s economy turns around. But then again it might just be wishful thinking seeing the current mess they are in.

    As for the Schadenfreude by Trilok… Let us not even compare ourselves with Pakistan. It will only help in keeping us mediocre.

  4. I agree with Socal here.

    Papistan’s geopolitical ‘utility’ such as it is, is to act against India’s influence spreading west of the indus and into Central Asia. To this end, driven by crazed and schizophernic madness, pak has been all too willing to cut off its nose to spite India, repeatedly since 1947 (1935, if the demand for pak and how it played into Brit hands against the INC).

    What’s a few $$$billions for PRC anyway compared with the utility of having a deniable proxy in Papistan against each and every Indian move in the region? How much more would India’s weight, influence, self-confidence and reach go up (to PRC’s direct loss) should Pak disapper off the map tomorrow?

    Hopes and predictions that the fin crisis will somehow keep Pak’s sponsors from keeping pak on life support don’t hold water. Umrika can always print a few more billions in paper and PRC can always dump the falling $$$ onto a failing Pak.

    India’ll need to do much much more, both covertly and overtly to bring the Pak establishment that is anti-India down and let a ‘normal’ state emerge in its ruins.

    JMts etc.

  5. Way too much wet dreaming. Pakistan has many suitors because of its strategic utility. Saudis have bailed them out before at even shorter notice. The Chinese, the Americans etc., will always make sure that the State of Pakistan remains in state.

    Pakistan’s crisis is only partly economic. Even if they had sufficient forex reserves and a generally healthy economy – which they did a year ago – they would still be cleaving themselves apart. No-one – not the Yanks, the Chinese or the Saudis – can help them with that. 60 years on they’re still an artificial state in search of a nation. The religious glue that was supposed to bind them together has become a toxic brew. The only cold consolation is that the spawn of Pakistan – those little Pakistanlets – threaten to be even worse than this current abomination.

  6. In my opinion the chinese would help them. There are various benefits for the chinese. One of the reasons is the state of pakistan could be used as a counterweight for every indian move and keep india engaged in the regional issues. If you digg little deeper and understand the rational behind this move by the chinese, lot of truth will be uncovered. Some of the political archives of 1950’s and 1960’s say the indian political elites were able to convince the United Nations and western governments that lot of Tibetians were driven out of their homeland as refuges to India. And Indias support to the Tibetian cause was justified. Most of the countries supported the freedom of Tibet. To break this notion and thwart any attempt by the indians to raise the tibetian issue, the chinese need to create trouble for India. And that was readily available through pakistan. By supporting pakistan, china can make india engulf in the regional issues rather than the ones they are concerned about. Now, most of the tibetians are still refuges and nobody takes note of this forgotten issue. Another important reason for support pakistan is the easily available trade route to Arabian sea. This is the shortest possible route to the Arabian sea for china.

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