Although the Pak rupee rebounded slightly yesterday on the news of $1.5 billion expected inflows after Pakistan signed a deal with the ADB for budgetary support, such small victories against the dollar will be short-lived. Since his return, Finance Minister Ishaq Dar has mostly used the power of fear to bring the scce the dollar down against the rupee, making exported and hoarders liquidate their long dollar positions to avoid losses. But that too has started to wane, as witnessed in the past two weeks, the greenback rebounding against the rupee and reaching Rs220 levels yet again.
The last major inflow of dollars was the IMF’s $1.2 billion tranche that came in last month has been mostly consumed and the foreign exchange reserves with SBP are at a worryingly low $7.5 billion as of last week. Eventually Pakistan will be looking to either secure fresh loans from ‘friendly countries’ or attempt to rollover existing facilities. China and Saudi Arabia have already been approached with requests for a rollover of their respective loans. As for new debt, there aren’t many places the Finance Minister can go. Attempts were made to get flood relief from the USA but only a meagre $130 million or so were raised and the other day US Secretary of State Antony Blinken categorically said, “go ask China for debt relief”. China too has its restrictions and concerns. Its economy is headed towards a recession as it is set to miss all its GDP growth targets and President Xi may have been selected for another term, but there are concerns over his regime’s handling of the economy during and post- covid. China therefore does not look at Pakistan the same way it did when CPEC began; an opportunity to make OBOR a success. It must now protect its own interests and understands that if it continues to be Pakistan’s lifeline in such times of economic trouble, other countries will expect the same from it and the capacity is simply not there. Sri Lanka being turned down is one example. Saudi Arabia too has been kind but has its limits. They attach certain conditions with their loans that Pakistan fails to fulfill after receiving the funds. It will be a difficult task convincing them this time around.
Ishaq Dar is perhaps then only banking on the perception that Pakistan is ‘too big to fail’ and will therefore be bailed out one way or another by bilateral donors, the IMF or the Paris Club. This however is neither a plan nor a sound strategy to run a country of 230 million. Better is expected from the economic leadership.
