China has once again come up to Pakistan's expectations to prove itself as Islamabad's time-tested friend by agreeing to place $500 million to support balance of payments. Formal announcement is expected to be made during President Pervez Musharraf's visit scheduled for April 10-15 to China.
This is a second time that China has responded to help Pakistan. Earlier, after the imposition of sanctions in the wake of nuclear test in 1998, China had placed a similar amount. The placement was rolled over. And, the first tranche of around $100 million is expected to be returned to China in September this year.
Forex placement from China will definitely ease pressure on Pakistan's economy and help the government plug its widening current account deficit, which is severally under pressure due to the ever-increasing oil import, as well as food imports.
FY 2008 being an election year and the transition to a new government, coupled with turmoil in the international banking scene, it has resulted in delaying Pakistan's foray into the bond market as well delaying raising of money through global depository receipt (GDR) for its public sector entities.
China is the second friendly country which has responded to Pakistan's call for BOP support. Earlier, Saudi Arabia had announced $300 million grant for Pakistan last month. With $500 million placement from Beijing, Pakistan's total BOP support will reach to $800 million.
Pakistan is facing serious financial crisis for multiple reasons and, after exhausting the normal resources for revenue generation, it is now desperately looking for help from friendly countries.
Some one-and-a-half months back, it had approached half a dozen close and trusted friendly countries, including China, to get financial support. Other countries, which were approached, included United Arab Emirates (UAE), Qatar, Kuwait and Saudi Arabia.
Sources said that Pakistan is expecting positive response for its call for help from the remaining selected countries soon. Pakistan's ambassadors in these countries are already pursuing the case.
Since Pakistan's major economic indicators are not showing healthy trend, it would need $4 to 5 billion for plugging in the current account deficit.
Sources in Finance Ministry told Business Recorder on Saturday that Pakistan's embassies in the remaining listed countries were keeping the officials in Islamabad informed on the progress, and hopefully more budgetary support will come in next couple of weeks.
It is ironical that Pakistan today stands at a crossroads as far as its financial health is concerned. In total contrast to economic wizards like former Prime Minister Shaukat Aziz and former Finance Minister Dr Salman Shah's claim of making Pakistan strong economically to absorb major shocks it is begging for help from close friends just to tide over the current account deficit. Its economic situation is so bad that the new government is facing it difficult to handle even day-to-day affairs.
Pakistan's correct financial strength could be gauged easily from its weakening currency. Pak rupee is depreciating against an ever weakening dollar. Critics of Shaukat Aziz/Salman Shah say there was no major investment in manufacturing sector for job creation last eight years. Delays in sanctioning public as well as private sector power projects were covered with excuses of 15 percent rise in demand for power as against six percent forecast. And, expansion of cellular network and unprecedented sales of mobile phones became the touchstone for economic progress.
Demographic of a young society were cited as the future potential for growth. However, providing the right skills for the ever-growing workforce was given lip service. Untrained and illiterate youngsters are said to be the ready fodder for terrorist groups. There was no effort to induce agriculture-based industries and bring value-addition for agriculture produce.
The new economic team, headed by Finance Minister Ishaq Dar, is already working on a white paper to apprise the nation about those who destroyed Pakistan's economy and left the new government to beg from friendly country for budgetary support.