No free lunches in fund raising The Statesman 09 Oct 18
The Statesman
No free lunches in fund raising 09 Oct 18
Pak has foreign exchange reserves for less than two months of imports. It immediately requires USD 12 Billion as a bailout to clear pending dues. The IMF has recommended stronger measures to be adopted by Pak to restore its financial status. Pak announced its willingness to adopt these measures, indicating its possible intention of seeking an IMF bailout. The CPEC, which was being projected as the saviour of the country is slowly moving towards being a debt trap. PM Imran Khan made his first set of visits to Saudi Arabia and UAE desperately seeking a bailout package.
While he rushed there, the army chief was in Beijing, conveying that Imran’s visit to the Middle East was not aimed at disrespecting China but to seek investments. Historically the first visit of any Pak head of state has been China. The entire visit of General Bajwa only spoke of the continuation of the CPEC and its importance to Pak.
Thus, it does appear that Pak is now feeling the pinch of its deep involvement in the CPEC. As loans increase, with no other source of revenue Pak has realised that investments by China are no gift.
Soon after the visit of Imran, delegations from Kuwait and Saudi Arabia arrived in Pakistan. It was initially announced that Saudi Arabia may join the CPEC, depending on the approval of China. Subsequently, it was announced that they would not be a part of the CPEC.
The reason stated was that the CPEC was a Pak-China agreement. This logic does appear warped as China had for long been requesting India to join. Now when a nation is willing, its offer is being rejected. This raises the question of whether China has any ulterior intentions in keeping it only bilateral.
Saudi’s are seeking to invest in the oil and energy sector. Reports stated that Riyadh was expected to be offered land for setting up a 500,000 barrels per day refinery worth USD 9 Billion, besides an oil storage facility in Gwadar. They are expected to sign a few agreements in the latter part of this month when a delegation revisits Pak.
Saudi Arabia had helped Pak financially in July this year when it announced a USD 1 Billion assistance. This was done days after the Islamic Development bank activated its three-year 4.5 Billion oil financing facility for Pak which would provide stability to the rupee-dollar exchange rate.
There were no reports of the Kuwaiti delegation signing any deal. The visit was overshadowed by the incident of a Pak civil servant stealing the wallet of a member of the delegation. Their possible investment may follow.
Simultaneous were reports that the Pak government has begun reviewing the terms and conditions of various projects under the CPEC. China, continuing its stranglehold has only agreed to review those projects which have yet to commence. The Pak railway minister, Sheikh Rasheed Ahmed, stated that the share of the CPEC in the railways has been reduced by USD 2 Billion. This again appears to be a vague statement as their own planning minister, coordinating the CPEC, had no comments on it.
Pak is aware that going to the IMF could be its last resort as there would be multiple conditions and pressures, mainly from the US, which it may not be able to fulfil. Further, it would have to lay bare all details of the CPEC funding, which could open doors to internal pressures also. China may not be willing to fund the entire amount that Pak needs.
It was therefore banking on Saudi Arabia, a nation with whom relations have been wavering over the years. Relations reached its nadir when Nawaz refused to agree to involve troops in the Saudi supported war in Yemen. Nawaz’s request for financial assistance of USD 5 Billion was also rejected by Riyadh.
Pak was seeking to balance relations and avoid coming into the tangle between Saudi and Iran. While government to government relations may not be ideal, the army’s relations with the country is far deeper. Saudi Arabia is propped by the US, as recent remarks by Trump and Riyadh assuring him on making up Iran’s oil supplies indicated, hence would always push the US agenda, despite being close to the Rawalpindi.
Early this year, General Bajwa announced the deployment of a further 1000 soldiers to the kingdom in addition to the 1300 already deployed. His decision was questioned in the national assembly but as in Pak, nothing could be done to overturn the chief’s decision. The rekindling of ties was again the handiwork of General Bajwa who had visited the Kingdom in late August. The fact that the Pak ex-army chief is heading the coalition created by Riyadh only enhances its proximity with Rawalpindi.
This re-kindling led to Imran rushing to Riyadh. Imran is aware that Riyadh may not provide the entire USD 12 Billion which Pak needs, however by undertaking a few projects, it could pump some funds into Pak banks, helping it tide over the immediate crises. The present visit and the possible signing of agreements this month does offer the idea that Saudi Arabia may be willing to assist Pak.
No nation, despite all proximity would be willing to provide financial assistance with low returns without seeking concessions. There would be demands on Pak from Riyadh. The demands could be to bring the Taliban to the negotiating table, reduce support to terrorist groups, recalibrate its relations with Iran and maybe even participate in Yemen by contributing troops.
Pak’s financial woes and its desperation to seek immediate financial assistance has added more dimensions than it may be expecting. As Zahid Hussain stated in an article in ‘The Dawn’, ‘It is a good idea to include the Kingdom in CPEC projects and to invite investments in other fields. Pak needs their funds but not their battles’. However, he may have missed Riyadh clearly stating US demands as non-negotiable. How long will Pak be able to avoid Riyadh pressures and still desire its funds remains to be seen.
About the Author
Maj Gen Harsha Kakkar
Retired Major General Indian Army