China to Give Pakistan 'Grant' as UAE Mulls $6B in Aid

[haidian]

VOA: China to Give Pakistan 'Grant' as UAE Mulls $6B in Aid

ISLAMABAD, PAKISTAN —

China plans to provide an unspecified financial "grant" to Pakistan while the United Arab Emirates is actively considering Islamabad's request for a fiscal relief package of up to $6 billion to help the country deal with a looming balance-of-payments crisis, Chinese and Pakistani officials say.

News of the anticipated financial aid came days after Prime Minister Imran Khan secured more than $6 billion in immediate financial support from Pakistan's close ally, Saudi Arabia, during an official visit to Riyadh.


Pakistan urgently needs foreign currency to shore up its depleting reserves of less than $8 billion, which is barely enough for servicing its debt and paying import bills.

Khan's nascent government, which took office two months ago and has inherited a debt-ridden national economy, estimates the country urgently needs about $12 billion to fulfill domestic and external liabilities.

Khan is to travel to Beijing Nov. 2-5 on his first official visit to the country, where he is scheduled to meet President Xi Jinping and his Chinese counterpart.

Chinese diplomats in Islamabad have announced ahead of Khan's visit that it will result in "good news" in terms of securing financial assistance for Pakistan.

"During the visit of the prime minister, we will provide, hopefully, a grant to the Pakistani government. Please look forward to the outcome of this visit. There will be more good news to follow," said Deputy Chinese Ambassador Lijian Zhao, when asked whether Beijing would provide Khan financial assistance similar to the package the Saudis have pledged. He declined to speculate on the size of the grant.

Under the Saudi deal, Riyadh will deposit $3 billion in the coming days with the central State Bank of Pakistan for one year, as balance-of-payments support. Additionally, Saudi Arabia will export oil to Islamabad worth more than $3 billion on a deferred-payment basis over the next three years.

Khan's government has rejected reports of any conditions attached to the Saudi aid package.

Federal Minister Haroon Sharif, chairman of the Board of Investment, said Saturday that the Pakistani government had formally submitted a financial request to a visiting UAE delegation similar to what Saudis have pledged. The Gulf state, he noted, is one of the biggest oil suppliers to Pakistan.

The minister said the UAE delegation "positively" noted the Pakistani request and promised to return with options in the next few days.

"It is expected to be a good package. I am unable to share the figures, but I think it would more or less be similar to the one Saudi Arabia has announced [for Pakistan]," said Sharif, who accompanied Khan during his visit to Saudi Arabia and will be part of the Pakistani delegation traveling to China.

IMF bailout plan

In addition to pushing friendly countries to provide fiscal relief, Khan's government has also turned to the International Monetary Fund to seek a bailout package. Formal talks are scheduled to begin in Islamabad on Nov. 7. Pakistan has taken advantage of repeated IMF bailouts in the past several decades.

Analysts say the Saudi financial package and expected aid from both China and the UAE will most likely boost Pakistan's negotiating position and may mean the country will require a smaller IMF arrangement.

During Khan's visit to Beijing, officials said the two countries would sign "many agreements" to boost trade and investment ties and launch the second phase of the China-Pakistan Economic Corridor (CPEC), which is the flagship of Xi's global Road and Belt Initiative.

The two sides will sign a framework for launching industrial cooperation under CPEC and increasing Pakistani exports to China.

CPEC, Khan's visit to China

The United States has persistently expressed concerns about the Chinese infrastructure and connectivity initiative, saying they are burdening partner nations like Pakistan with debt. The U.S. also criticized a lack of transparency about the terms of contracts under the infrastructure initiative and consequent effects on the economy, said Henry Ensher, acting deputy assistant secretary of state.

He acknowledged in a speech in Washington this month the importance of China-led initiative. "But that role ought to be done, ought to be played in accordance with usual rules about the transparency and accountability so that people in countries that cooperate with China can see clearly what they are signing up for," Ensher said.

U.S. officials have already cautioned the IMF about entering into an arrangement with Pakistan, citing CPEC loans as a main factor for the country's debt crisis and suspecting the IMF money would be used to pay back China.

Islamabad and Beijing have vehemently rejected Washington's assertions as "misplaced" and "irrelevant." Both countries acknowledge Chinese loans under CPEC are just over 6 percent of Pakistan's total domestic and external debts of about $95 billion.

Since launching CPEC in 2013, China has invested $19 billion in Pakistan, building or upgrading its transportation network and power plants and putting into operation the key Arabian Sea port of Gwadar.

The mega-project is expected to bring more than $62 billion to Pakistan in Chinese investment by 2030, ultimately linking Gwadar to the landlocked western Chinese region of Xinjiang and giving Beijing the shortest secure access to international markets.

"We are building these projects totally based on mutual consultation and also mutual sharing. … Definitely, there is no private interest or unilateral interest from the Chinese side. We believe all the projects are mutually beneficial," Yao Jing, Beijing's ambassador to Islamabad, told reporters at the sprawling Chinese Embassy on Friday.

https://www.voanews.com/a/china-to-give-pakistan-grant-as-uae-mulls-6b-in-aid/4632243.html

 

[haidian]

Kind of envious that Pakistan has so many rich friends..

 

[AZADPAKISTAN2009]

We need to learn from china how to reduce corruption

 

[Chinese-Dragon]

We need to learn from china how to reduce corruption

We still need to work on corruption as well.

Or maybe we can just do what America does, legalize corruption and call it "lobbying".

Pakistan urgently needs foreign currency to shore up its depleting reserves of less than $8 billion, which is barely enough for servicing its debt and paying import bills.

Pakistan needs to stop burning through its reserves trying to keep the value of their currency up. Let it fall to market levels. There will be a lot of short-term pain as the costs of imports go up, but it will be good for the competitiveness of Pakistan's domestic industries in the long-term.

 

[Yaseen1]

when currency goes down oil and gas and industrial equipment become expensive as they are imported and we not have these domestically and it will take time to generate electricity cheap from domestic sources as dams need to be constructed which discourages new industry and also it is very difficult to control labor wages to lower level due to inflation

We still need to work on corruption as well.

Or maybe we can just do what America does, legalize corruption and call it "lobbying".



Pakistan needs to stop burning through its reserves trying to keep the value of their currency up. Let it fall to market levels. There will be a lot of short-term pain as the costs of imports go up, but it will be good for the competitiveness of Pakistan's domestic industries in the long-term.

 

[Chinese-Dragon]

when currency goes down oil and gas and industrial equipment become expensive as they are imported and we not have these domestically and it will take time to generate electricity cheap as dams need to be constructed which discourages new industry and also it is very difficult to control labor wages to lower level due to inflation

Pakistan's reserves have fallen to less than $8 billion which is not enough to cover imports and debt servicing.

Trying to save the currency from falling is just throwing good money after bad, it will cost many billions more and the value of the currency will still fall. It's not achieving anything.

What Pakistan needs is to improve the economic fundamentals, which requires a great degree of short-term pain, but sometimes pain is a good thing. Especially when a problem needs to be fixed.

 

[Yaseen1]

reserves are falling due to money laundering and corruption

Pakistan's reserves have fallen to less than $8 billion which is not enough to cover imports and debt servicing.

Trying to save the currency from falling is just throwing good money after bad, it will cost many billions more and the value of the currency will still fall. It's not achieving anything.

What Pakistan needs is to improve the economic fundamentals, which requires a great degree of short-term pain, but sometimes pain is a good thing. Especially when a problem needs to be fixed.

 

[Chinese-Dragon]

reserves are falling due to money laundering and corruption

How does money laundering lower the national forex reserves?

 

[PakGuns]

We still need to work on corruption as well.

Or maybe we can just do what America does, legalize corruption and call it "lobbying".



Pakistan needs to stop burning through its reserves trying to keep the value of their currency up. Let it fall to market levels. There will be a lot of short-term pain as the costs of imports go up, but it will be good for the competitiveness of Pakistan's domestic industries in the long-term.

In desperate need of FDI, the currency should stay up

 

[Chinese-Dragon]

In desperate need of FDI, the currency should stay up

If the Pakistani currency depreciates, it means that overseas investors will find it cheaper to invest in Pakistan. They have to pay less dollars for the same investment.

So currency depreciation tends to lead to an increase in FDI.

Also, defending a currency can't work forever, especially not with less than $8 billion in reserves which is already at an emergency level. It is literally burning money.

 

[Yaseen1]

people send money from foreign countries through using non banking channels using private money dealers who keep dollar and provide local currency to receiver and also private individual buy dollars in market and launder dollars to foreign countries through hundi which result in shortage of reserves and many bankers are also involved in it using fake bank accounts

How does money laundering lower the national forex reserves?

Fdi will only increase it there are attraction of profitability of investment .If someone buy a land money devaluation decreases its value and hence it is loss for foreign investors.

If the Pakistani currency depreciates, it means that overseas investors will find it cheaper to invest in Pakistan. They have to pay less dollars for the same investment.

So currency depreciation tends to lead to an increase in FDI.

Also, defending a currency can't work forever, especially not with less than $8 billion in reserves which is already at an emergency level. It is literally burning money.

 

[Chinese-Dragon]

people send money from foreign countries through using non banking channels using private money dealers who keep dollar and provide local currency to receiver and also private individual buy dollars in market and launder dollars to foreign countries through hundi which result in shortage of reserves and many bankers are also involved in it using fake bank accounts


Fdi will only increase it there are attraction of profitability of investment .If someone buy a land money devaluation decreases its value and hence it is loss for foreign investors.

But how is defending the Pakistani Rupee even possible with an emergency level of less than $8 billion in reserves?

You know India burned $5.14 billion of their forex reserves in a single week trying to defend their currency:

https://www.business-standard.com/a...rupee-defence-says-bofaml-118102700027_1.html

India's reserves plunged $5.14 billion in the week ended Oct. 12, the biggest drop in seven years, suggesting the Reserve Bank of India intervened to curb the rupee’s decline. The support helped the currency recover 1.4 percent from a record low of 74.4825 per dollar on Oct. 11. The rupee lost 0.3 percent Friday to 73.4675 in Mumbai.

And the Indian Rupee is still suffering at a near record low, though at least they have a sizeable amount of reserves remaining so they can still afford it.

These kind of short-term "band aid solutions" will not fix the underlying problems, fixing those problems requires a lot of pain but it's the only solution. The grants provided by Saudi and China won't be anywhere close to enough to wage a currency battle like this.

 

[Yaseen1]

i think we should limit supply of rupee by means other than buying rupee against dollars by stopping printing new currency notes or increasing the amount of commercial bank reserve to be kept with central bank it will keep our currency value secure from declining and also not effect reserve usage

But how is defending the Pakistani Rupee even possible with an emergency level of less than $8 billion in reserves?

You know India burned $5.14 billion of their forex reserves in a single week trying to defend their currency:

https://www.business-standard.com/a...rupee-defence-says-bofaml-118102700027_1.html



And the Indian Rupee is still suffering at a near record low, though at least they have a sizeable amount of reserves remaining so they can still afford it.

These kind of short-term "band aid solutions" will not fix the underlying problems, fixing those problems requires a lot of pain but it's the only solution. The grants provided by Saudi and China won't be anywhere close to enough to wage a currency battle like this.

 

[艹艹艹]

The U S has been using the dollar to exploit other countries

 

[Sugarcane]

Pakistan needs to stop burning through its reserves trying to keep the value of their currency up. Let it fall to market levels. There will be a lot of short-term pain as the costs of imports go up, but it will be good for the competitiveness of Pakistan's domestic industries in the long-term.

Previous government burned all the forex in d!ck measuring contest with opposition to keep PKR strong, But this government says that they will leave the currency to market dynamics, till now they have faced the criticism but let the PKR fall to settle on real value. I hope they'll continue to do so and will work on the economic factors to keep the currency stabilized.