China, Pakistan etch out details for $6bn bailout plan

China, Pakistan etch out details for $6bn bailout plan
Prime Minister Pakistan Imran Khan with his Chinese counterpart, Li Keqiang, witness the proceedings as several MoUs are signed between the two countries in Beijing on November 3. (Photo courtesy: PID)
Updated 10 November 2018

China, Pakistan etch out details for $6bn bailout plan

China, Pakistan etch out details for $6bn bailout plan
  • Islamabad says Beijing has approved aid package in principle
  • Crucial details of program still under discussion, top official says

KARACHI: Pakistan and China are in the process of finalizing the details of a $6 billion bailout package which Islamabad is seeking to stabilize its external balance of payment situation, officials said on Saturday.
During Prime Minister Imran Khan’s recent visit to China, Beijing had assured Pakistan of its support to uplift the country’s economy and “firmly move forward” on various infrastructure projects.
A Pakistani delegation — comprising the State Bank of Pakistan’s (SBP) governor and secretaries of finance, trade and planning — is in Beijing to finalize the details of the program, which is aimed at enhancing exports, too.
“The details of the outcome will be shared once the delegation returns home,” Noor Ahmed, spokesman for Pakistan’s Minister of Finance, told Arab News on Saturday without divulging any other details.
However, Dr. Farrukh Saleem, spokesman on Economy and Energy, said that China in principle has approved the aid package for Pakistan. “Now three things are under discussion. First, the framework of this aid package; so, the magnitude of the aid package and thirdly the sources of the aid package,” Dr. Saleem told Arab News on Saturday.
“China does not want publicity of its activities as it is against its nature of working,” he said, adding that during the past three fiscal years, “China has provided around $6.5 billion” through the Bank of China to the SBP, but “only few people know about it”. 
Meanwhile, it is pertinent to note that during PM Khan’s visit, the Chinese authorities offered $1 billion market access to double Islamabad’s exports to $2.75 billion.
“Pakistan is looking at ways to increase exports to China in order to avail market access,” Abdul Razak Dawood, Adviser for Commerce, Textile, Industry & Production, had told Arab News in a recent interview.
Earlier, this week, Pakistan’s Finance Minister, Asad Umar announced that Pakistan has emerged out of its balance-of-payments crisis, after securing $6 billion from Saudi Arabia and an equal amount from China, adding that Islamabad needed $12 billion to fill its external financing gap.
Pakistan is simultaneously negotiating with China and the International Monetary Fund (IMF) for a bailout program. “Pakistan will receive some $5-6 billion from the IMF,” Umar was quoted as saying by the local media.
Meanwhile, overseas workers’ remittances — another integral source of support for the country’s economy — showed encouraging growth as Pakistan received $7.4 billion in the first four months of the fiscal year 2018, compared to $6.4 billion received during the same period last year (2018).
“The prospects to get Chinese support are high and it will substantially ease the pressure on the balance of payment situation,” Dr. Ikram Ul Haq, an expert on economic and legal matters, told Arab News, adding that the move would “bring in no positive results as the entire amount is going to bridge the gap and in essence would be a fresh liability replacing the old one”.
Muzzamil Aslam, a senior economist and CEO of EFG-Hermes Pakistan, believes that China and the IMF are two opposing sources which Pakistan is dealing with at the moment. “If we seek Chinese support they will demand to not share the details of the CPEC with the IMF and if we rely heavily on the IMF, they will ask for sharing information of China,” Aslam said.
He added that Pakistan will continue to seek Chinese support “to avoid harsh conditionalities of the IMF and to run the economic affairs of its country as per its own will”.
China, the second biggest global economy, shares minimal trade ties with Pakistan at 0.8 percent, with 0.1 percent dedicated to exports and imports respectively.
The existing Sino-Pak trade ties are largely tilted toward Beijing — Pakistan exported $1.75 billion worth of goods to China, while Beijing’s exports stood at $11.47 during the fiscal year 2018, according to the SBP.