Dear reader, online ads enable us to deliver the journalism you value. Please support us by taking a moment to
KARACHI: Pakistan plans to borrow more than $4 billion from the Saudi-backed Islamic Development Bank (IsDB) as part of its attempts to restore dangerously low stocks of foreign currency, reported The Financial Times on Thursday.
Two officials told the daily that the Jeddah-based bank had agreed to make a formal offer to lend Islamabad the money when Imran Khan took over as prime minister. They added that they expected Asad Umar — Mr Khan’s proposed finance minister — to accept the offer.
See: Imran Khan and the IMF: Pakistan's bailout dilemma
“The paperwork is all in place,” said one senior adviser in Islamabad. “The IsDB is waiting for the elected government to take charge before giving their approval,” the report quoted the official as saying.
The official added that the loan would not cover Pakistan’s expected financing gap of at least $25bn during this financial year but was “an important contribution”.
Speaking to reporters in Islamabad this week, Mr Umar had warned: “The situation is dire. We’ve got 10bn dollars of central bank reserves, [and] we’ve got somewhere between $8bn and $9bn in short-term liabilities, and therefore your net reserves are close to nothing.”
As per the newspaper report, officials have already drawn up plans to borrow up to $12bn from the International Monetary Fund — though such a bailout is likely to come with strings attached, such as a demand to see the details behind billions of dollars’ worth of Chinese loans.
Mr Umar, it added, was therefore exploring what other options remained open to him, of which the IsDB loan was one. Officials said the loan would be used mainly to pay for oil imports, with higher crude prices having contributed to the country’s problems.
One official at Pakistan’s central bank — who has been involved in negotiations with the IsDB — said the loan had the backing of the Saudi government, “which wants to play a part in rescuing Pakistan from its present crisis”.
Despite the promise of money from the IsDB, economists warn that Mr Khan’s government will still have to enact potentially unpopular spending cuts and tax rises to help repair the government’s balance sheet.
“The budget deficit shot up to about 7 per cent of gross domestic product during the last financial year,” Waqar Masood Khan, a former finance ministry official told FT. “Bringing that down to the target of 4 per cent is not going to be easy,” the report added, quoting the official.
Published in Dawn, August 10th, 2018
Comments (104) Closed
This is called debt rotation. Now Saudi will be another one of the many puppeteers of Pakistan.
This is the reason behind supporting Saudi against Canada. hahhahaha
Thank you ishaq dar for brInging all the economic misseries to us.
Great News
Foreign capitals know IK is clean
@Sohail Khan Kindly stop lying. I am economist myself. In my view Ishaq dar did a great job. The dollar was stabilized during his time. When PMLN joined then our reserves were at dangerously low level. Now they are at historic high. Inflation remained under control, whereas our debt to gdp ratio was better than many European countries. Moreover the economic outlook remained stable for 4 years. Then the political instability was introduced during the last year to create an impression of chaos. And now many political trolls with no knowledge of economics are bashing the previous govt.
@HWH In International Relations, it is important to remember who your friends are and a friend in need is a friend indeed.
These incompetent PMLN looters have completely destroyed this country. Why do people still vote for them?
We the public knows that how and who are responsible for this low foreign reserves. New government must do its utmost to bring to justice runaway and at home politicians responsible for money laundering and stealing of our national wealth otherwise we will think that new government is also the same as PML-N.
This money is stained in blood. Saudi Arabia is no different than Israel and other terrorist states. Please don’t take their money.
Reject the loan
and now we have to support Yemen war for this $4 billion loan
Lets liquidate all the foreign holdings of all the dacoits who looted the nation for last seventy one years.
Refuse the loan if they have any self respect
So now we owe debts to even more people. Was this what we got for selling ourselves to the Saudis and supporting them in their spat with Canada? Is that all the PTI government-elect could do? No new ideas, no out of the box thinking?
A friend in need is a friend indeed. Thanks you Saudia again.
India can help, all you have to do is to peacefully handover occupied Kashmir
Reject this loan. They killed 50 Childern just yesterday.
let’s see how pti turnaround pakistan economy an extreme challenge
Thanks to time tested great friend Saudia, now we must help them by sending our troops to Saudia Arabia as per their earlier demand.
And hence Pak sides with Saudis!
This is the way American diplomacy works.
This loan news itself seems like danger to me and frequently appearing across Pakistani media recently.
Isnt this a frightful situation.
How will you repay it. Its a dangerous game- rotating debt.
Borrowing from Peter to pay Paul ? Imposing exchange controls may be the better solution. When we earn, say, 100 rupees we should not be spending 300 rupees. We should spend 90 and save 10.
@Jamal Are you serious?
Money talks.
Pakistani should have a law that when a new GOVT come into power, it does post mortem on what the previous govt did with regards to public funds. I'm really angry in the state PML-N has left Pakistan. Yet NO ONE would question them.
@fRedIndian how do you know so much about Pakistan?
@Omair correction please!! Noon League a very competent looter but hopelessly incompetent in running the country!
Those responsible for this economic policies and financial crisis must be exposed and shamed and kicked away
In short, MBS bought his share in "Niya Pakistan" for 4B$ !!!
NAYA PAKISTAN Let's help ourselves before we beg to others. We British Pakistanis are ready to "DONATE" to Imran Khan new government. Let's target $10 billion. Learn the lesson of Syria and Afghanistan. I rather have a safe and proud Pakistan than thousands of pounds in my account.
This is the reason for Pakistan siding SA against Canada ?
Billionaire around the work invest in 3rd world countries signing deals that are beneficial to them and beneficiary. Pakistan should arrange a table talk session with billionaire around the world to discuss potential opportunity for them in telco , banking , real estate , Oil & gas , Morning , logistic , transpiration etc Their should be a give / take policy. It’s ok if they monopolize certain business segments but it will bring investment , address current issues , long terms job creation etc Question is how soon we can arrange 2080 plus billionaires in a common place. We have shahid khan a Pakistan billionaire in the Forbes list , he can be put on task to arrange this session btw imran khan and team.
@Omair It is because no education, keep the people uneducated, so they can not figure out right from wrong. How else will these criminals get votes. Simply look at one thing. If the finance minister of a political party has done a runner, and is not willing to come back. If hes has done no wrong. Why is he still in London? We can not blame anyone but ourselves. Vote for the best man or woman, and not vote for someone because they are from your cast.
Pakistan need 1 Bn USD per week, now see how many more weeks ?
How is Pakistan going to change, if we keep taking loans on from other countries? Our aim should be to clear all our debts.
Taking debt to pay for debt. Might as well declare bankruptcy.
Good thing for PTI. This amount can be used for repayment of Chinese loan. Loan from IMF can be used for other expenses. So how to repay Chinese loan next year? Somebody said, don't repay loan amount at all. But this is not a good thing for a responsible country. IK will find the solution.
@fRedIndian sad that dawn and readers dont Realize that ISDB is not Saudi backed but all Islamic countries have a seat on the table - but KSA may have an influence
At what rate of interest this loan agreement has been signed ? A loan is a loan .I hope this govt will not hide anything from public. There is one thing to remember that Saudi will definitely have some big motive behind this loan. Time will tell that.
What kikd of people are we who can not survive without loans?
I wonder, what happens if we pass a law to declare IMF and WB enemy of state and disregard all previous loans? IMF and WB do not have armies. We will never be able to ovtain more loans from these two in future but will save billions of dollars for our country.
IMF is million times better than taking loan from Saudis. Saudis will force Pakistan army inside Yemen conflict.
Now More troops can join their boss in Saudia.
Money talks!!!
@RUMI Debt rotation, is a term in finance
@Omair Same question . Knowing what they have done. Still PML N won seats
We need more education
that's Saudi's price bid to buy IK and attempt to keep him away from Iran.
Better than IMF is Saudia's loan ... Muslim countries should stay united.
Small children under 10 years of age killed by the Saudi led attack in Yemen??? Please take note.
Debt from IMF, Debt from China , Debt from Saudi, Debt from NRI bonds.... Debt debt debt debt
To get rid of this extreme debt issue the people and government should come on the same page. There is no magic wand. People should pledge to not put pressure of government to import more and more expensive things atleast for a couple of years. Sheer hard work and manufacture can boost exports too. Time to wake up
More loans ?! Nice !! There's no certainty in repaying china for CPEC loans... Now you can add Saudi to that list !!
Indeed a true friend im need.
I hope Pakistan does not take any help from any of these Arab countries. Let Pakistan work on decrease expenses.
@fRedIndian Did not India take loans?
When you take more loans to repay existing loans, you get into a debt trap. That is what Pakistan is getting into.
@Arshad : Interesting observation. The next question is how much percent of the whole?
@Awan Sahib - I would hate to be an economist with such thinking and perceptions.
Will it not amount to borrowing from A to pay B? Circular debt? Innovation.
@Awan Sahib. Why is he in hiding then. His measures were backed on false pretences by borrowing on a scale never seen before in the history of the country. Manipulating the economy to give a positive outlook could only go on for a short period of time. Ishaq Dar has alot to answer for. In 90s East London his wheeling and dealing in the area on behalf of Sharifs is well known.
@Ameer hope they do this gesture as a friend only. They dont demand troops in return or impose their fascist ideology upon us.
@Awan Sahib Please enlighten on how Ishaq Dar kept the economy floating? I have serious reservations over your education degree.
@irfaniftekhar India can repay its loans. Hence its at a much higher credit rating compared to pakistan. By the way $4 billion is not enough. As per your new finance minister -to-be, pakistan has a deficit of $2 billion a month. This loan will take care of only 2 months then.
The Saudis are not going to offer a loan of $ 4 B without any strings attached. What is the quid pro quo for this generous offer ?
All this trouble has been created by the wrong policies of the previous government and ex finance minister is still in London. He should be called back soon.
Good thing there will be no interest! SA does not believe in interest. It will be halal transaction
At least they are better than IMF and WB and definitely more friendly than U.S. and other Western loan lending financial institutions.
I am an economist by profession. All economic fundamentals suggest that Pakistan is suppose to be having trade surplus with the existing exchange rate. Pak rupee depreciation should automatically fix foreign reserve shortage. That is economics. But that is not working. Why??
There are serious issues with public - private dynamic. My impression is that private sector is hostage of federal government because of corruption, nepotism and incompetence in federal government at a very large scale. Let the private sector to grow and let it take care of trade deficit. Federal government should help the private sector in the following four areas
No distortion of any kind in industrial sector, rather helping them to grow and compete.
@Awan Sahib I think you should stop pretending to be an economist, holding Dollar rate artificially was the biggest mistake that Ishaq Dar made.
@Ann Counter my statements with a factual figurs or else just shut up. Emotionalism does have a place in PTI but not in economics. Also thanks for questioning my education. It shows the blind hatred and biased viewpoint of one party and its supporters.
Kaskool Part II
@Shahzad Election is a post mortum.
Do not take a cent from the Saudi's , better to learn to say no thank politely, Pakistan is almost 71 years old, and about time it realizes what was the reason for creating Pakistan in the first place, was it created to remain in debt. always why cannot we live within our means, however meager. Do what we can do with our own two hands, and live without these loans, which our children will have to pay back with interests,
Former Prime Minister Nawaz Sharif had all but destroyed the country economically due to failed leadership, bad governance and corruption. Therefore, the people voted for Imran Khan who has pledged to root out corruption, holding everyone accountable starting from him. This is great news for the country. This is also the time friends of Pakistan should stand with the people of Pakistan and help, and not create economic hurdles for them.
Despite the promise of money from the IsDB, economists warn that Mr Khan’s government will still have to enact potentially unpopular spending cuts and tax rises to help repair the government’s balance sheet. It is what it is, its not like Imran Khan wants to take a loan to build a motorway or a Metro bus, its about pulling the country out of this financial mess, no thanks to the PML-N government
@Awan Sahib sir can u guide us about the $ 4 billion lona effect on dollar rate?
@Awan Sahib From your reply from nowhere you look to be an Economist. Yes dollar did sustained a stable rate but where were those measures to bring it down. The historic highs are due to the policy of the Nawaz Govt.
For avoid this is future please recover the black money from Swiss, UK and Dubai.
Ever since I was born, all I can remember is that Pakistan is in an economic crisis.
Make sure no religious string attached.
@Awan Sahib But can you explain, how come he was noted to be living way beyond his means? None other than corruption and inflated claims. If things were really good, we will not be hearing the hue and cry for more borrowing now. In fact the rupee started to plunge as soon as the real picture of the economy hit the news after PML-N corruption scandals were confirmed.
@Tamil Nadu LOL. Yes I know beggars are rich in India.
@Kunal Yes we have a lot to thank PML-N and their cronies for, maybe now the people can see you should not vote for ghadars.
@Awan Sahib Fully agree. Pakistan rupee was a stable currency during first 3 years of Nawaz Sharif government.
@Omair because they know whole truth and not half truth like you.
if ishaq Dar did a great job why he is hiding in England and why he is not coming back
Just wondering how much would be markup with this loan IsDB usually charge higher interest rate
what if we dont take the loan and impose sanctions on imports for next 1 year until foreign reserves come back to normal due to foreign remittances?
IK initial speech after winning the election has set the tone and whole nation is with IK and ready to play their part on achieving the Pakistan dreamt seen by Jinnah and Iqbal.
Debt trap. Taking fresh loans to service the earlier loans and interest .. Bad situation
Overseas Pakistani must donate to save Pakistan.
IK should not take the loan. I do not want to be a citizen of a slave government.
I hope it will be interest free loan from a friendly country
Start of Naya Pakistan, with Chinese and now Saudi loan.
@Awan Sahib it strange being an economist you are defending that dupe accountant who played havoc with the economy of pakistan who mortgaged the future of our generation through piling up such a huge debts external as well as internal He is going to be made accountable the master mind of all corruption
@Ameer , do remember that in International relations there are no permanent friends, only permanent interests.
I think Pakistan should not take this loan, as Saudi will try to impose their will and expect you to wag your tail in return for its favors.
Don't backup Saudi in Canada cause, Imran Khan said we don't need foreign Aid. I would like to see him raise this fund within the nation.
ksa will demand support for all their misadventures right. Hope PTI government hires non corrupt and competent people to handle this deal as it needs to be pure busines/non-emotional transaction and there should be contigency to handle worst case scenario.
that's how you may resolve some economic issues but what about the social cost. Are Saudis, our "friends", will not dictate their terms? --- religious extremism, relationships with Iran, our policy on ME conflicts etc etc!!
decide what is more important to --- as PTI used to say that Human capital is to have priority over Infrastructure .... so now the new questions for them is economic help or social well being? We don't want another economic prosperity brought by Zia ul Haq!
Recover asap all laundered money by unpatriotic politicians and non politicians. This should be the FIRST priority of Imran Khan's Government.
Pakistan should stand on its own feet asap.
Pakistan should get out of Saudi Arabs's influence and economic gestures. Saudi Arabia is a policeman country serving USA interests.
Be independent Imran Khan..
Develop your natural resources including water, minerals and energy resources. Let us stop our dependence on other countries and IMF and World Bank. They are their to dictate their terms injurious to the people of Pakistan.
Pakistanis should start paying taxes immediately
Where is magician Ishaq Dar. Please bring him back so that he can explain the economic situation to the nation.