Pakistan to take International Monetary Fund bailout despite Saudi rescue package

Saul Bowman
October 27, 2018

Pakistan's Prime Minister Imran Khan has secured $6 billion in financial support from Saudi Arabia as Riyadh reels from worldwide outrage over the murder of journalist Jamal Khashoggi.Islamabad announced the deal Tuesday night after Khan attended a Saudi investment conference, the so-called "Davos in the desert", even as several other leaders declined invitations over Khashoggi's death at the country's consulate in Istanbul on October 2.Riyadh says insider-turned-critic Khashoggi died in a fistfight with Saudi officials, while Turkey says he was killed in a premeditated murder.After Khashoggi's disappearance, business leaders and government officials pulled out of the Future Investment Initiative (FII) conference, but Pakistan is facing tough economic realities that Khan, who took office in August, can't ignore.

Growing global outrage over the murder of journalist and Saudi government critic Khashoggi has overshadowed the Riyadh conference, expected to run until Thursday. "We wait for whatever the Saudi explanation is", he was quoted as saying.

Saudi's financial bailout to Pakistan comes in the midst of the Islamic nation's current account deficit of Dollars 18 billion, which had triggered Pakistan to seek assistance from the International Monetary Fund earlier this month.

He is paying the visit on the special invitation of King Salman Bin Abdel Aziz.

During his participation at the plenary titled "Emerging Opportunities" within Future Investment Initiatives (FII) 2018 held in Riyadh, the Pakistani Prime Minister affirmed that his country has huge mineral wealth, adding that Pakistan seeks to increase exports due to significant decrease in the foreign reserves.

But some tough talking by IMF Managing Director Christine Lagarde and the U.S. on Pakistan's bailout plan, demanding absolute transparency on the country's debts, including those owned by China under the China-Pakistan Economic Corridor (CPEC) projects, has upset Islamabad.

The USD 60 billion CPEC is the flagship venture of the Belt and Road Initiative (BRI), a pet project of Chinese President Xi Jinping aimed at enhancing Beijing's influence around the world through China-funded infrastructure projects.

Pakistan is desperately seeking funds from "friendly" countries, including Saudi Arabia.

The benchmark KSE 100 index of the Pakistan Stock Exchange gained 1,556 points or 4.13 per cent in intra-day trading to push the index to 39,271 points.

He is now scheduled to travel to Malaysia next week and to China on November 3 to seek financial assistance from the two friendly countries.

Pakistan's Foreign Ministry on Tuesday night said the latest visit had met with success. Pakistan is to return the $3 billion after one year, but the terms are apparently negotiable.

The leaders of the two opposition parties lashed out at Khan for what they called his threatening tone for the opposition and called upon the government to take parliament into confidence regarding the proposed bailout package being offered by Saudi Arabia. Khan was chairing a follow-up meeting regarding facilitating overseas Pakistanis, particularly to ease and incentivise home remittances through legal channels, before he departed for Saudi Arabia to attend an investment conference. The USD 3 billion oil on deferred payments will lower the overall financing needs by the same amount, which had been earlier estimated at USD 31 billion, the report said.

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