Pakistan’s Prime Minister Imran Khan has arrived in Beijing to rework “all-weather” ties with China, after reinforcing Islamabad’s bonds with regional heavyweight Saudi Arabia, and keeping the door open for the re-entry of western backed International Monetary Fund (IMF) into his country.
He was received at the airport in the early hours on Friday by Chinese Minister for Transport Li Xiaopeng, Chinese Ambassador to Pakistan Yao Jing and Ambassador of Pakistan to China Masood Khalid. In the afternoon, Mr. Khan was welcomed by Chinese President Xi Jinping at the Great Hall of the People.
Mr. Khan has arrived at a time when Pakistan’s economy is in doldrums, and could benefit from financial support from China — Islamabad’s longstanding ally.
Pakistan’s foreign exchange reserves have reached an alarming low of around $8 billion — barely sufficient to finance about two months of imports. Current account deficit in the financial year that ended in June was around $18 billion.
Prior to Mr. Khan’s arrival in Beijing, Saudi Arabia had come to Pakistan’s aid with a $ 6 billion financial support package. That included a $3 billion deposit for a period of one year, to help Pakistan wriggle out of its immediate balance of payment crisis.
Despite Riyadh’s emergency support, Pakistan is likely to approach China for financial backing to minimise its requirement for a loan from the International Monetary Fund (IMF).
“What we are hoping is that we do a bit of both, get a loan from IMF and other loans from friendly governments,” Mr. Khan said during an investment conference in Riyadh last month.
Despite its economic woes, Pakistan has some cards up its sleeve which it can leverage to ensure a more even-handed conversation with President Xi and Prime Minister Li Keqiang.
Analysts point out that China needs Pakistan’s full support to make the China Pakistan Economic Corridor (CPEC) a success. China has billed the $ 62 billion CPEC as the flagship undertaking of its Belt and Road Initiative (BRI), thus staking its prestige on the viability of the project. It is thus likely that Pakistan can re-negotiate better financial terms with China, with the intent of avoiding a “debt trap” that Beijing could have the option of leveraging in order to draw political benefits. China is also looking for Pakistan’s support to becalm unrest in Xinjiang—a vast region of mountains and deserts, through which the BRI is routed.
Pakistan has already signaled that it may not completely toe Beijing’s line on Xinjiang. In September, Pakistan’s minister for religious affairs, Pir Noorul Haq Qadri, was quoted as saying that he had sought an easing of restrictions on Muslims living in Xinjiang, during a meeting with Chinese ambassador to Pakistan, Yao Jing.
Observers point out that it is likely that both sides would agree on minimising Islamabad’s reliance on an IMF loan package. Pakistani officials have been quoted as saying that heavy dependence on the IMF is likely to spell harsh conditionalities, including a severe austerity and privatisation programme. For China, that can lead to the opening of CPEC records to the officials of the IMF, whose biggest backer is the United States. “In whatever work we do, we need to have a complete understanding and absolute transparency about the nature, size, and terms of the debt that is bearing on a particular country,” Christine Lagarde, managing director of the IMF, has been quoted as saying during a recent IMF meeting in Indonesia.
Mike Pompeo, the U.S. Secretary of State, has earlier warned warned that IMF funding should not be used to repay Chinese bank loans.
Source: The Hindu