Pakistan plans to borrow over $4 billion from the Jeddah-based Islamic Development Bank to bolster the country’s low level of foreign currency reserves, the Financial Times reported on Thursday.
The FT report quoted two annonymous officials and said that the bank had agreed to make a formal offer after Pakistan Tehreek-e-Insaf (PTI) chairman Imran Khan formed his government in the Centre. One of the officials, introduced as a senior advisor in Islamabad, claimed that paperwork for the purpose was all in place. “The IDB is waiting for the elected government to take charge before giving their approval.”
The other, an official at the State Bank of Pakistan who was part of negotiations with the IDB, was quoted as saying that the loan was backed by the Saudi government, “which wanted to play a part in rescuing Pakistan from its present crisis.”
Pakistan faces a chronic public finance crisis as indigenous revenue generation capability remains limited in the absence of a robust tax machinery and skewed distribution of wealth. As a consequence every incoming government has to knock at the doors of international lender of last resort, the International Monetary Fund, and mostly loans secured are use to pay off previous loans. The incoming PTI government has already started considering seeking a fresh bail out package from the IMF.
Published in Daily Times, August 10th 2018.
