Nov 24 - 30, 2008

The Chinese Finance Ministry spokesman last month said, "China would extend all possible help to Pakistan 'within its capability' to help it avert the looming financial disaster." Seen in the backdrop of the giant economy's supreme financial strength vis--vis Pakistan's requirement of a meager $10 billion or so, the rider 'within its capability' seems a euphemism for Pakistan's incapacity to win its friends" confidence.

The global trust deficit that we have been trading for our mundane political pursuits and financial bungling has put us under a powerful international scanner which can expose our unsightly anatomical disfigurements. Instead of showing chagrin on Chinese and Saudi refusals to pamper us with bumper cash grants, we should go in retrospect and come up with some solid arguments to support our case. Did we go to Chinese to seek their advice before toppling an economically sound regime?

Did we think for a moment that what will be Chinese reaction who was deeply involved with us in a number of ongoing strategic development projects despite perpetual threats to its engineers' and workers' lives. The economic and financial crises did not ensue from some natural catastrophes, rather these were self generated. To get generous financial assistance even from the best of our friends, we must have a strong case. A real friend never supports foolish misadventures. If we got only $500 million from China, perhaps we are worth just that.

We should not have any doubts about China's all-time friendly stance on Pakistan. The infrastructure and telecom sector investments during Musharraf era now stand officially entered in the economic fact-file. The sudden shock of political destabilization in Pakistan took China by surprise like it took most of our other global partners. Nevertheless, China in the true spirit of a friend is loading the pipeline with various investment projects. According to a news item, China is preparing itself to raise a soft loan of $1.3 billion for Pakistan in addition to a $3.7 billion investment in telecommunication and power sectors.

Despite international pressures, China stands committed to help Pakistan and Nigeria through an investment package of $4 billion by 2009. The premier Gwadar project that was completed during Musharraf rule is destined to play a historic role of joining China to Africa. The abduction and killing of Chinese engineers both in Pakistan and Nigeria have failed to weaken the Chinese resolve to help its two friends. Nigeria is the first country to benefit from Chinese satellite while Pakistan stands to benefit from a similar satellite facility in 2011. While casting any doubts on Chinese intentions to help its friends, the friends should appreciate the international pressures China has been busy in warding off. Certain Indian and European lobbies use blatant media force to distract China from its commitments to its friends. China's plans to increase Pakistan's nuclear civil energy capacity by investing in two more projects in addition to Chashma-I and Chashma-II have not been digested well by certain global players, but China stands its ground to fulfill its commitments. Friendship is not a one way affair. We will have to do a lot of stock taking to see when, why and how we failed to reciprocate the ever-friendly gestures of China.


The only good news in the gloomy setting is that we have finally concluded a $7.6 billion deal with the IMF under Stand By Arrangements (SBA) program. The loan is said to have been priced at 6 to 6.5 per cent. The first tranche of $3-4 billion will be released upfront, while the balance will be disbursed on quarterly basis. Although we lost quite some time in reaching that 'decision of the last resort', we still have time to prepare ourselves for the renovation of our ravaged financial and economic brickwork. We would still have been groping in the dark, had it not been for a realistic banker who was quick to reconcile to the ground realities. Pakistan's revisit to IMF was stage-managed.

US script was simple worded; stop thinking in terms of any free lunch, no dole-outs this time, just move straight on the route to IMF. We were supposed to follow the script, and we did it. Standard & Poor's, after downgrading Pakistan rating from CCC+ plus to CCC, is now positively reviewing rating on our successful negotiations for an IMF rescue package. The following statement of S&P official simply unveils the global powers' plan to afford us a bailout on some harsh yet realistic terms:

"The IMF loan is the only recipe for Pakistan, keeping in view the bitter facts; otherwise no one will come to its rescue from being declared a defaulting country."

It will be noted with interest that while, the politico-media combine used all their destructive force to malign the previous government's economic policies, the new government had no option but to use the macroeconomic indicators of the last eight years to convince IFIs and Friends of country's economic potential. A Gulf Times article says:

"The government of the day is struggling for the said loan by selling the economic performance during the Musharraf regime owing to which the country has been lifted from a low-income to the medium-income country."

The November 17 Abu Dhabi meeting of the Friends of Pakistan has also concluded in strict compliance to the original US script. According to a Dawn report, Monday's meeting only included mid-level officials and focused on exploring investment opportunities in Pakistan. The forum agreed on a broad framework for cooperation with Pakistan in four major sectors; development, security, energy and institution building. The two close friends of Pakistan, China and Saudi Arabia also joined hands with others to support Pakistan through multilateral forums. The things going the way the US has charted, the coming months are likely to usher in a better politico-economic era for Pakistan. Official US sources are reported to have confirmed, according to a press report, that the US congress was likely to approve a multi billion dollar aid package for Pakistan through Biden-Lugar bill early next year.