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Cash-strapped Pakistan to seek IMF bailout despite $6 billion aid package from Saudi Arabia

Pakistan Prime Minister had earlier this month asked Finance Minister Asad Umar to seek the IMF bailout after initial failure to secure much-needed assistance from “friendly countries”.

India TV News Desk India TV News Desk
New Delhi Published on: October 25, 2018 8:48 IST
Imran Khan
Image Source : PTI

Imran Khan- File photo

Though Saudi Arabia has offered a $6 billion aid package to cash-strapped Pakistan, Islamabad is still mulling over seeking assistance from the International Monetary Fund (IMF), news agency PTI reported.

According to officials, Pakistan Prime Minister had earlier this month asked Finance Minister Asad Umar to seek the IMF bailout after initial failure to secure much-needed assistance from “friendly countries”.

However, the offer for financial assistance came from Saudi arabia after Imran Khan rushed to Riyadh on Monday to attend a Saudi-sponsored international investment economic forum despite its boycott by the European and American investors in the wake of murder of journalist Jamal Kashoggi.

Khan’s meeting with Saudi King Salman and his powerful Crown Prince Mohammad bin Salman resulted in the singing of agreement to provide Pakistan USD 3 billion to support balance of payment and give oil worth USD 3 billion on deferred payments.

As stock market showed bullish sentiment and rupee gained against dollar, questions were raised if Pakistan still need the IMF package.

Sources in the finance ministry told PTI that Pakistan needed about USD 10 billion in the current fiscal year to support its imports and paying foreign debts.

“The idea of seeking IMF support is still on the table and negotiations will be held in the first week of November,” they said.

But they said that Pakistan’s bargaining position was strengthened after the Saudi commitments.

The sources also said that Prime Minister Khan would visit China from November 3 and it was possible to get financial assistance to further decrease reliance on IMF bailout.

Earlier, officials said that Pakistan would seek around USD 8 billion from the IMF which would be the biggest package by the Fund for Islamabad.

Saudi aid eases pressure on forex reserves: Pakistan PM Imran Khan

Responding to Saudi Arabia’s offer of $6 billion assistance package,  Prime Minister Imran Khan on Wednesday said that it has eased pressure on Pakistan's foreign exchange reserves and exuded confidence that the country will emerge stronger and more prosperous in the coming years.

In the deal announced Tuesday after Prime Minister Khan called on Saudi King Salman bin Abdulaziz, Riyadh said it will give Pakistan USD 3 billion in foreign currency support for a year and a further loan worth up to USD 3 billion in deferred payments for oil imports.

Khan addressed the nation to share the details of his efforts to bring cash-strapped Pakistan out of financial difficulties.

"My Pakistanis, today I am here with a good news for all of you. We were facing really hard times. We were under high pressure to pay heavy debts. But thanks to Saudi Arab's extension of assistance, we are out of the pressure," he said.

The Prime Minister also said that the government was in contact with two other friendly countries for more financial assistance.

He said people should not worry as the difficult time would pass and Pakistan will emerge as a much stronger and prosperous country in the coming years.

He did not name the countries but official sources said that the two countries were the UAE and China.

They said that a high-level UAE delegation will arrive in Pakistan on October 26 to discuss investment opportunities, while Khan will visit China in the first week of November to seek business and investment as well as explore financial assistance.

Khan said the Saudi financial package will strengthen Pakistan's bargaining position in case the government approached the International Monetary Fund (IMF) for a bailout.

He said even if the government was forced to seek IMF assistance, it would not need as much money as it would have needed in absence of the Saudi assistance.

Pakistan's Finance Minister Asad Umar recently said the country may need more than USD 12 billion to plug its finances as the current-account deficit widens and foreign-currency reserves plummet.

Khan also said Pakistan would try to play the role of a mediator in the Yemen war.

"I also want to share with you... we were trying to play a role in ending the Yemen war," he said.

The Prime Minister criticised the previous governments and held them responsible for the current economic crisis.

He said the country's debt was Rs 6,000 billion in 2008 which ballooned to Rs 30,000 billion in 2018.

Khan said the government was doing audit of the massive debt and threatened that the corrupt element would face merciless accountability.

He also said that his mega project of constructing 5 million houses in five years would revive 40 industries and create job opportunities for the youth. 

Pakistan is in search of USD 12 billion foreign loans and aid to avoid default on international debt obligations, as the country is required to return USD 11.7 billion loans to foreign countries.

(With PTI inputs)

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