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| India-Pakistan | |||
| Rebuffed by China, Pakistan May Seek I.M.F. Aid | |||
| 2008-10-18 | |||
| ISLAMABAD, Pakistan -- President Asif Ali Zardari returned from China late Friday without a commitment for cash needed to shore up Pakistan's crumbling economy, leaving him with the politically unpopular prospect of having to ask the International Monetary Fund for help. Pakistan was seeking the aid from China, an important ally, as it faces the possibility of defaulting on its current account payments. With the United States and other nations preoccupied by a financial crisis, and Saudi Arabia, another traditional ally, refusing to offer concessions on oil, China was seen as the last port of call before the I.M.F. Accepting a rescue package from the fund would be seen as humiliating for Mr. Zardari's government, which took office this year. An I.M.F.-backed plan would require Pakistan's government to cut spending and raise taxes, among other measures, which could hurt the The Bush administration is concerned that Pakistan's economic meltdown will provide an opportunity for Islamic militants to capitalize on rising poverty and frustration.
"A selling point to us even has been, if the economy really collapses this is going to mean civil strife, and strikes, and put the war on terror in jeopardy," said the official, who declined to be identified because he was not authorized to speak to the news media. "They are saying, 'We are a strategic country, the world needs to come to our aid,'" he said. Pakistani officials said they had received promises from the Chinese to help build two nuclear power plants, and pledges for business investment in the coming year. But Pakistan had also hoped China would deposit $1.5 billion to $3 billion in its central bank, according to senior officials at the I.M.F. and Western donor countries. The infusion of cash would have helped with payments for oil and food as currency reserves dwindle, officials said.
"We may have to go to Plan B," he said.
The new government has reduced subsidies on fuel and food, and the central bank moved on Friday to ease an intrabank liquidity crisis. In addition, new rules were imposed several weeks ago on the Karachi stock exchange to stop sell-offs. But none of those steps have stanched the crisis in confidence. The central bank's currency reserves have dipped to $4 billion, enough to cover payments for oil and other imports for about two months. As it became clear over the past two days that the Chinese were not going to provide a cushion for Pakistan, the rupee slumped to a record low. The thin results from the China trip were of little surprise to Western donors. Asked about the likelihood of Pakistan winning the direct cash infusion it was seeking, a senior Chinese diplomat was reported by Western officials to have said, "We have done our due diligence, and it isn't happening." "What we needed is $3-to-$4 billion," said Sakib Sherani, a member of the government's economic advisory panel and chief economist at ABN Amro Bank in Pakistan. That amount was necessary "to build confidence," he said. The central bank governor, Shamshad Akhtar, said in a telephone interview on Saturday, "We are very open to all kinds of financial support." She added, "We've taken a lot of corrective actions, and we plan to take more." But Zubair Khan, a former commerce minister and a critic of the government's economic management, said confidence would improve once Pakistan arranged an I.M.F. rescue package. Mr. Khan said that the alternative would be the imposition of controls on imports and capital flows that could do long-term harm to the economy. Meanwhile, the American financial crisis is also expected to hurt ordinary Pakistanis. Remittances from Pakistanis living abroad to their relatives in Pakistan were expected to be about $7 billion this year, about $3 billion of that from Pakistanis living in the United States. But those remittances are likely to dwindle, affecting real estate values in Pakistani cities and families who live in poorer rural areas. Mr. Zardari had approached the China trip with considerable fanfare, saying he was looking forward to visiting a country that had enjoyed a warm relationship with Pakistan, particularly during the rule of his father-in-law, Zulfikar Ali Bhutto. His visit to Beijing followed a trip there by the chief of the army, Gen. Parvez Kayani, and came at a time when the relationship between Washington and Pakistan was strained over how to deal with the escalating threat from the Taliban and Al Qaeda. Javed Burki, a former Pakistani finance minister, said China had provided $500 million in balance-of-payments support in 1996, when Pakistan was on the brink of default. He had flown to Beijing to ask for the money and his request was fulfilled. But those days are over, he said, because China is no longer inclined to grant cash outright without structural reforms from the receiving government, he said. | |||
| Posted by:john frum |
| #8 will provide an opportunity for Islamic militants to capitalize on rising poverty and frustration. Funny, that's exactly what the very same people have been saying about Paleos for the last 20 years. |
| Posted by: g(r)omgoru 2008-10-18 23:01 |
| #7 If Pakistan would stop spending more than half their budget on the military, they might be able to pay for oil and food. |
| Posted by: john frum 2008-10-18 20:03 |
| #6 Economic hardship has been mounting across Pakistan for several months. Electricity shortages have become so dire that even middle-class families in big cities have to ration supply, with power cuts for 12 of every 24 hours, with one hour on, and one hour off. Food prices have soared, making some basics, even flour, too expensive for the poorest to afford. Some how I missed that over the last few months. The Land of the Pure now has too many weapons and not enough food. What say you all: more raids into Afghanistan, or more fighting at home? |
| Posted by: trailing wife 2008-10-18 19:55 |
| #5 "Pakistan's crumbling economy" If you'd quite funding the Talibunnies, you'd have plenty of money, Asif. |
| Posted by: Barbara Skolaut 2008-10-18 19:50 |
| #4 Hummm.... Ima bookmark dawgs site. Ran across this in the 1st half page: A little more than a week ago, A Hamburger Today introduced the world to the Hamburger Fatty Melt, a burger with grilled cheese sandwiches as its bun. |
| Posted by: .5MT 2008-10-18 19:02 |
| #3 These folks need more F-16z |
| Posted by: .5MT 2008-10-18 18:58 |
| #2 If they'd actually do something about terrorism aside from offering lip service with their hands out they might get somewhere. |
| Posted by: hairodthedawg 2008-10-18 18:48 |
| #1 I've got an idea. Pakistani Baluchistan is rich in minerals, and so is next door Iranian Baluchistan. If Iran got into a war with Israel and/or the US, Pakistan could take over Iranian Baluchistan, and not only get a lot of wealth, but finally end the Baluchis creating problems for both nations. |
| Posted by: Anonymoose 2008-10-18 18:00 |