Details on this shot-in-the-arm package, said to be materializing rapidly, are still sketchy. There have been several reports in the mainstream Pakistani news media that the Finance Ministry is close to announcing a $10BN package being formulated with Saudi Arabia and China. The Saudis will contribute $6BN in the form of deferred oil payments and the Chinese are considering an injection of about $4BN.
In addition to this $10BN, IMF officials visited Islamabad and offered a multi-billion dollar support package with softer terms than the IMF typically provides. The IMF support payments were offered in $500M tranches. Pakistan has expressed its inclination to turn down the IMF offer, which seems to be consistent with the views espoused by IMF’s Asia head, Mohsin Khan. He recently stated that Pakistan didn’t really need an IMF loan. He characterized the Pakistani economy as fundamentally resilient and expressed his opinion that with a bit of “belt tightening” the current crisis could be overcome.
China’s $4BN package will probably come in the shape of infrastructure and business investments in Pakistan. Two examples of these inflows were highlighted to Prime Minister Gilani recently during a meeting with China Chemical and Engineering Corp. executives:
Prime Minister Gilani was told that China Mobile had already invested $ 800 million in Pakistan’s telecommunications sector and was set to invest more in the country this year.
During the meeting with CNCEC, the Prime Minister appreciated China National Chemical and Engineering Corporation’s $ 900 million investment in operating nine plants in fertilizer and PVC sectors in Pakistan.
In addition to the $1.7BN highlighted in the above quote, China has also announced that it will be fully funding the $8.5BN Daimer-Bhasha dam. After initial delays, construction is now set to start in 2009 and disbursements are expected in the next few months.