- Love from Beijing
The prime minister’s visit to Beijing was quite a success, as expected, but latest reports suggest that the big cake he’s bringing back will be without a cherry on the top. Despite the broad range of contracts, and Chinese promises of bailing Pakistan out, it seems they’d rather talk a little more, about terms and conditions no doubt, before delivering any balance of payments support that we’ve asked for. That is strange, to say the least. Because one, the five or six billion that we need is a tiny sum compared to the magnitude of investment China is already making in Pakistan.
And two, this would be a very temporary loan. Just like the Saudi dollars heading for SBP vaults, we’d have to return any Chinese money in a year or so as well. Plus we won’t be allowed to spend any of it; it’s just supposed to make the reserves look prettier than they are. And they extended this facility to the previous government as well. Maybe the Chinese would like to think this through a little more, or maybe Imran Khan is holding the news to surprise the nation.
Either way, impressive as the government’s drive to seek a non-IMF way of bolstering reserves is, this is a very short term resort and soon we will have to go borrowing again. This way we will end up at the Fund’s door one way or the other. The right way is rather longer term. It will involve expanding the manufacturing base, adding value to production and exports, and giving local traders a level playing field with their competitors. Only then will Free Trade Agreements (FTA), like the one we are going to sign with Turkey, make sense. The PM promised to turn our economic outlook from aid to trade. His finance team must, therefore, start working on the overhaul now so it can show some results by the end of this electoral cycle.