Escaping the IMF

Pakistan hopes that while China would offer cash of $500 million a month for the current financial year, Saudi Arabia would offer petroleum products on deferred payment, with its strings being that the oil facility would not be used to make further borrowings, and that oil prices remained stable. On the other hand, the IMF wants to appraise the reforms of the recent era. It also wants an end to remaining subsidies on food, electricity and gas. The Finance Ministry opposes this because the resulting inflationary spiral would make Pakistani exports uncompetitive, with export industries already claiming a loss of their edge.

The remaining question is why China or Saudi Arabia should lend to Pakistan, and that too on terms less harsh than the IMF. This is because of their respective strategic friendships with Pakistan, which make it unsuitable for them for Pakistan to either collapse or fall again within the IMF’s grasp. Also, the current crisis has made Saudi Arabia particularly, even richer than before, so both are countries which can afford this loan to Pakistan.