Asad Umar, the incoming finance minister of Pakistan’s newly-elected government has said that his country would need $12 billion in loans - at the very least - just to keep itself afloat.
The former head of Pakistan's Engro Corporation speaking to Bloomberg in a recent interview said that the loan amount urgently needed is in the range of $10 billion and $12 billion. He went on to say that Pakistan would need something extra from thereon to move away from the edge. "The decision needs to be taken in the next six weeks, the further you go forward the more difficult, the more expensive the options become," he is quoted as saying.
Pakistan’s deteriorating finances with an economy propped up by loans from international lenders, is a key challenge for the prime minister to be – Imran Khan, who is attempting to form a coalition government after winning the most number of seats in last week’s general elections.
Many investors and analysts see a bailout from China or the IMF as inevitable for Pakistan. Rising imports and volatile oil markets have greatly hurt the country, especially because its exports - mainly textiles - have seen marginal growth.
With the start of the China-Pakistan Economic Corridor (CPEC) in 2013, Chinese loans to Pakistan have increased many folds. Though there is no clear estimation in this regard, however, economists believe that around $19 billion out of total $90 billion foreign debt of Pakistan, is from China. In other words, China has now become the biggest bilateral lender to Pakistan, surpassing Japan.
Umar added that Pakistan could turn to the International Monetary Fund, friendly countries and issue diaspora bonds to bolster the nation’s depleting reserves. The last time the country turned towards IMF was in 2013 when it got a $6.6 billion loan for a crisis of lesser proportions than the one existing now. This time, the U.S. could act as a roadblock as U.S. Secretary of State Mike Pompeo recently released a statement saying his country does not think it is fair that Pakistan wants money from the IMF to pay off debt accumulated through loans with China.
Umar addressed this fact in his interview, stating that 'Pakistan does not have a Chinese debt problem.'