China and Saudi Arabia to ‘Help’ Pakistan Avoid Default: Ishaq Dar

Pakistan’s risk of default is expected to die away this month after forex inflows from China and Saudi Arabia.

Finance Minister Ishaq Dar said on Wednesday that the International Monetary Fund (IMF) program would be completed at any cost, that China and Saudi Arabia would increase their support, that government-to-government (G2G) disinvestments would be completed, and that the current account deficit would be about $3 billion less than previously projected.

Talking numbers during a press conference yesterday, Dar postulated that the country’s foreign exchange reserves would be in much better shape by June 30, 2023. He stated that the 9th review has no issues and that the current government is determined to finish the IMF program.

He said the lender had requested information not only for the current quarter but also for the following quarters, as well as how the $16 billion in flood funding would be met and in how much time.

He repeatedly brushed aside questions about the prospect of the country defaulting on its foreign debt, reiterating that the Opposition was pushing such rumors. Dar claimed the recently issued ‘white paper’ on Pakistan’s economy was likely based on selective data, misleading numbers, factually incorrect, and lacking in an economic context.

The minister opposed that revenue collection during the first five months of this fiscal year (July to November) exceeded a threshold agreed upon with the IMF under the eighth quarterly review for contingency budgetary measures.

He further added that a large revenue of up to Rs. 290 billion super tax proposed for December could not be realized due to stay orders in Sindh, resulting in a revenue shortfall in December. On projections for fuel in the region, He said petrol and diesel prices had dropped by Rs. 19-20 per liter for petrol and diesel, and by Rs. 29-30 for kerosene and light diesel in the past three months.

In response to a question, the finance minister stated that many countries tax foreign exchange earnings. He claimed that various agencies were already working to combat the smuggling of foreign currency and other commodities such as wheat and fertilizer.

Pertinently, China and Saudi Arabia in September agreed to increase their support for Pakistan, which the Saudi finance minister later confirmed to international news agencies. While the process had been delayed, Saudi Arabia has vouched to increase its support much sooner than the end of this month, while the Chinese loan rollover was also being processed.

He also indicated that privatization transactions, particularly the sale of LNG plants and other assets on a G2G basis, were progressing and would be completed within six months, he added.

During the presser, Dar admitted the government’s inability to control inflation. He conceded it was a major source of concern for the coalition and that it would now concentrate on slowly bringing it down. He once again insisted that by June 30, 2023, inflation and other economic indicators would be much better.

Echoing the viewpoint of everyone in attendance, Dar commented that the economic situation since April 2022 has been heavily influenced by the legacy left by the previous administration.

Published by
Ahsan Gardezi