Finance Minister Muhammad Aurangzeb has said that now China, Saudi Arabia and the USA have agreed to a rollover of a total of $12 billion, the IMF is now good to give a 37-month $7 billion EFF, which is expected now to be approved by the IMF’s Executive Board at the end of this month or the beginning of next.. There is one problem with these roll-overs. They only provide a one-year relief from the need to repay them. Another problem is that they have been rolled over before, and it is likely that the political cost of getting these rollovers will increase when Pakistan attempts to get another rollover. And attempt it will have to, because the deposits will become due for repayment before one of the reviews for the IMF programme, and if it is not possible to repay these deposits, the IMF is likely to make Pakistan get them rolled over.
These debts are not just ordinary sovereign debts, but the Saudi and Emirati debts are deposits with the State Bank of Pakistan. They are not meant to be used, but merely bolster the foreign exchange reserves, and give an essentially false sense of security to foreign commercial lenders. They are not wholly responsible for some credit rating agencies’ refusal to upgrade Pakistan, but have been a contributing factor. The Chinese debt is in the form of money owed to Chinese banks for CPEC loans. Chinese rollovers are nerve-wracking as they can only be made if the amount owed is actually paid; then there is a fresh loan made. This helps explain why the government is attempting to issue so-called Panda Bonds. Though this might be a clever way of rolling over Pakistan’s debt, it will still remain debt.
This makes clear the country’s central problem. This IMF programme is not the ultimate goal. Clever ways of managing the debt are not needed, because they will still leave the country in debt. Some way of repaying the debt is necessary, so that no more rollovers are needed. However, so long as the attitude that debt is there to be contracted, not repaid, remains, among the country’s decision makers, the country will not emerge from the debt trap it finds itself in.
