- Working with Pakistan
While SBP Chairman Tariq Bajwa is right in implying that Chinese commercial banks are flush with credit – though whatever made him think they are holding the funds just to lend to Pakistan? – he might have been a little overconfident in saying that asking China for a bailout actually deepens mutual ties. But Beijing, forward looking as it is in financial matters, must have understood Pakistan’s chronic addiction to debt by now. And, of course, it is happy to play lender of last resort to Pakistan to keep Islamabad from knocking at the Fund’s door, since that would oblige us to open our books to them and divulge all sorts of CPEC transactions that China wants us to keep mum about.
Yet it’s not quite as straight forward as the SBP would have you believe. Best Pakistan can hope for now is a $1-2 billion facility to shore up reserves in the immediate term, plus the one-point-something billion that China forwarded recently. However, that does not even scratch the surface of the near $15b required just for debt repayment next year. Add to that, at the risk of repetition, costs of running the government which Islamabad also traditionally borrows and there’s no way, practically, that Pakistan will not go begging elsewhere too sooner rather than later.
With Pakistan’s deficit constantly in dangerous red, and no plan on the horizon to effectively add value to exports or expand the tax net – quite the opposite, actually, if you consider the last budget – there’s a feeling that China might tire of bearing the responsibility of keeping Pakistan solvent and afloat. True, Chinese banks are overflowing with credit, but Pakistan has traditionally never been the safest investment for lenders. Nobody knows that better than the IMF, of all IFIs, which had to call off programs with us half way due to non-compliance on many occasions. Tariq Bajwa might not be around for much longer, but if this trend continues Beijing might not be overjoyed every time we go there with a begging bowl.