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NEW DELHI – After Pakistan's government signaled that it would seek a bailout from the International Monetary Fund, Imran Khan's Prime Minister said this week: "He inaugurated a public-housing project to deliver five million dollars. homes.
That tension – between Mr. Khan's campaign and the social welfare state of the world. But investors typically detracted from the Pakistani rupee, which hit a historic low, while hammering the stock market with a sell-off, wiping $ 2 billion off the index's value.
There is only more uncertainty ahead. On Thursday, the Pakistani government formally began the process of seeking an I.M.F. bailout worth up to $ 12 billion. But analysts say the country's financing gap can be as high as $ 20 trillion, leaving investors worried that the government can not ask the fund for a robust-enough package while continuing to ask China and Saudi Arabia for more loans, after taking several trillions of dollars worth of loans from Beijing this year alone.
The concern surrounding Pakistan's economic race and Mr. Khan's intentions has clearly left the I.M.F. skeptical, and the result can be a tough road ahead for the country if it is to get its bailout.
The fund's managing director, Christine Lagarde, insisted on Thursday that Pakistan provides "absolute transparency" on its debts, which is part of its Belt and Road construction program. Pakistan is a showcase for China's initiative, hosting up to $ 62 billion in Chinese investments, mostly financed by Chinese banks.
Any bailout for Pakistan would require "complete understanding and absolute transparency about the nature, size, and terms of the debt that is bearing on a particular country," Ms. Lagarde said, as she prepared to meet the Pakistani delegation later Thursday at the I.M.F. and World Bank Group Annual Meetings in Bali, Indonesia.
Later that day, the I.M.F. Ms. Lagarde had put the Pakistani team on the table and it was supposed to be teamed up with Islamabad in the coming weeks.
Ahead of Pakistan's July Elections, Mr. Khan promised to open the books on Chinese and other projects that were unnecessary or too costly. Pakistan's previous government, led by ousted Prime Minister Nawaz Sharif, has been harshly criticized by China's investments in the country.
Pakistani government, including Mr. Khan, accuses it of doing a poor job. Goal Since coming to office in August, Mr. Khan has not opened the books. The United States has accused Beijing of using "debt trap diplomacy" to load up countries with debt in order to secure political and military demands, a charge China's government denies.
Although Pakistan faces an external debt burden of $ 8 billion this year, the first payments to China as part of the Belt and Road Initiative come due in 2019, with $ 1 billion owed, officials say. Pakistan's foreign exchange reserves hit a four-year low last week, hovering at $ 8.4 billion according to the central bank. That is less than enough to cover even just two months of imports.
"Going to the I.M.F. was inevitable. There is no other way out, "said Farrukh Saleem, spokesperson for Pakistan's Ministry of Economy.
He added: "Even if China had given $ 26 billion to Pakistan, it does not give confidence to the markets. It's not about the bailout but getting into an I.M.F. monitoring program, "which gives investors assurance that
Although Mr. Khan maintains that he will be both I.M.F. These statements are contrary to the stance of both the finance minister and the information minister, Fawad Chaudhry, who said that the conditions were not acceptable.
"We spoke with the United Arab Emirates, China, Saudi Arabia and held consultations with other countries," Mr. Chaudhry said in televised remarks Tuesday. "We did not want to take the money the way it was being given to us."
The information minister did not explain what the conditions were. Purpose Saudi Arabia and the U.A.E. have been in the past requested that Pakistan join their war in Yemen, which has bogged down those countries financially while Yemeni civilians are being killed by bombing and starvation.
On the campaign trail before the elections, Mr. Khan championed austerity even though he promised to build an Islamic welfare state. The new project is a part of his "Naya Pakistan" agenda – meaning New Pakistan – to kick – start the economy and provide support to the country 's poorest.
But going to the I.M.F. will likely mean cuts to those welfare state dreams.
"With the I.M.F., there will be an impact on the government not fulfilling its election promises. "But welcome to the real world," said Mr. Saleem, the spokesman economic ministry.
The President of the Islamic Republic of the World, President of the Islamic Republic of China, Mr. Khan's government will commit to the I.M.F.'s austerity terms. This would be the latest in at least 12 I.M.F. programs Pakistan has undertaken in the last few decades, failing to complete the structural reforms.
"This crisis could have been better when the government had declared their plan two months ago, when they came to power. Instead they gave mixed messages, leaving the markets guessing. "Ashraf Wathra, the former central bank governor under the previous government.
While Mr. Wathra acknowledges that the former government is at fault for the national ballooning debt, he says Mr. Khan should have taken over the overwhelming advice from economists to go to the I.M.F. as soon as possible.
This week, the Pakistani rupee fell as low as 137 to the United States dollar, shedding 10.2 percent of its value. The biggest ever one-day fall was in 1998, when the rupee fell 11 percent after Pakistan tested nuclear weapons.
Pakistan's business community, and even ardent supporters of Mr. Khan's party, have also been angry at what many described as "dithering" ahead of the decision to go to the I.M.F.
Farooq Sarwar, a rawalpindi-based import of food, toiletries and confectionary items, has had to cut down on his stock.
"The dip in the dollar has affected the importers in a way that no one knows what to do right now," Mr. Sarwar said. "We had high expectations from the current government and thought they would take steps after taking people in to confidence. But it seems they had done no homework. "
Salman Masood contributed reporting from Islamabad, Pakistan, and Alexandra Stevenson from Hong Kong.
