Pakistan still plans to seek a bailout from the International Monetary Fund (IMF) despite a Saudi Arabian offer of a $6 billion rescue package, Pakistan’s finance ministry said on Wednesday.
Prime Minister Imran Khan secured the Saudi package at a high-profile investment conference in Riyadh that has been boycotted by several other leaders over the death of a dissident Saudi writer at the country’s consulate in Istanbul.
In the short-term the Saudi loans will give the economy breathing room, but it will not be enough to fully avert a brewing balance of payments crisis, analysts said.
Pakistan will proceed with talks on the country’s second IMF bailout request since 2013, and its 13th rescue package from the multilateral lender since late 1980s, the finance ministry said.
“Yes, we are going ahead into programme negotiations with (IMF) in the first week of November,” Noor Ahmed, spokesman for the ministry, told Reuters in a text message.
On Tuesday, Pakistan said Saudi Arabia had agreed to provide $3 billion in foreign currency support for a year and a further loan worth up to $3 billion in deferred payments for oil imports to help stave off a current account crisis.
Pakistan’s main stock market index closed 4.1 percent higher on Wednesday on the news of the Saudi help.
Pakistan’s foreign reserves have plunged 42 percent since the start of the year and now stand at about $8 billion, or less than two months of import cover.
Ahmed said the Saudi loans will strengthen Pakistan’s negotiating hand in talks with the IMF, which is likely to push Pakistan to implement painful structural reforms linked to the currency, the energy sector and other areas where Pakistan’s global competitiveness has lagged.
Khan said this week Pakistan was seeking help from “friendly nations”, which is usually a reference to close allies Saudi Arabia and China, to go along with any IMF programme.
Khan is due to travel to China in the first week of November, where he is expected to seek further assistance.
– The Himalayan Times