JUST when we thought that the new $7bn IMF bailout was within our grasp, the finance minister surprised the nation by revealing that Pakistan had to get its bilateral debt from three of its close allies ‘re-profiled’ for the next three to five years before the lender approved the lifeline deal next month. Speaking at a news conference on his return from China on Sunday, Muhammad Aurangzeb told the media that Islamabad had already asked its three main creditors, including China, Saudi Arabia and the UAE, to re-profile their loans amounting collectively to $12bn for up to five years for more stable planning of Pakistan’s external financing under the IMF’s fresh 37-month Extended Fund Facility. “Between now and the IMF board meeting, we have to ensure confirmation of external financing from friendly bilateral partners,” he said.

As a report in the paper pointed out, Pakistan has “a peculiar financial arrangement” with the countries mentioned — consisting of loans and deposits that can be renewed annually as Pakistan is unable to repay the money because of the dollar crunch. They “form a major part of the IMF programme”. Pakistan owes $5bn to Saudi Arabia, $4bn to China and $3bn to the UAE. Will these creditors agree to the request for extending the maturity period of these loans? The finance minister is quite hopeful, although others are not. He says he is in contact with his counterparts in these countries for the rollover of loans for an extended period of time, and claims that he has their assurances of support that would help Pakistan plug the external financing gap. Even if these countries agree and we secure the IMF dollars, it will not solve our deep-seated problems. Pakistan is in a fix due to its inability to earn enough export revenues and attract non-debt-creating flows, such as FDI, to pay its import bills and finance its growth. It is a shame that a country of 240m finds itself on the brink of insolvency and is forced to knock on door after door for bailouts because its elites have become addicted to living luxurious and subsidised lives on borrowed money. The sad thing is that they are not ready to change even in the face of Armageddon. Something has to change — and soon — before the economy collapses under its own weight.

Published in Dawn, July 30th, 2024