Khan calls on Pak­ista­nis abroad to dou­ble the money they re­mit and help cash flow

▶ Plan to raise up to $40bn launched as price of IMF bailout threat­ens to de­rail PM’s pop­ulist cam­paign prom­ises

The National - News - - NEWS - BEN FARMER

Prime Min­is­ter Im­ran Khan hopes to ease the fi­nan­cial cri­sis fac­ing his coun­try by per­suad­ing Pak­ista­nis over­seas to dou­ble the amount of money they send home.

Mr Khan said he was draw­ing up in­cen­tives to en­cour­age na­tion­als abroad, in­clud­ing mil­lions liv­ing in the Mid­dle East, to in­crease re­mit­tances and pro­vide vi­tal for­eign cur­rency.

The coun­try is in the grip of deep­en­ing fi­nan­cial woes and last week be­gan talks with the In­ter­na­tional Mone­tary Fund for Is­lam­abad’s 13th bailout since the late 1980s.

The move marked an about turn for Mr Khan’s govern­ment, which had spent weeks try­ing to ob­tain loans from Saudi Ara­bia and China, both of which baulked at the size of Is­lam­abad’s prob­lems.

An IMF bailout would come with tough con­di­tions that would prob­a­bly cur­tail his prom­ises to over­haul health, hous­ing and ed­u­ca­tion by build­ing a wel­fare state.

Mr Khan said over­seas Pak­ista­nis were an as­set that could im­prove the coun­try’s fi­nances.

“We are go­ing to an­nounce a spe­cial pack­age of in­cen­tives to en­cour­age them to send re­mit­tances through bank­ing chan­nels by re­mov­ing all hin­drances and pro­ce­dures,” he said.

“The Philip­pines did this suc­cess­fully. In­shal­lah, by re­mov­ing these hin­drances we will be able to in­crease re­mit­tance flows from $20 bil­lion (Dh73.46bn) to at least $30bn and per­haps even $40bn through bank­ing chan­nels.”

Mr Khan pledged to crack down on il­le­gal land mafias prey­ing on the prop­erty of Pak­ista­nis liv­ing abroad.

An es­ti­mated 3.5 mil­lion Pak­ista­nis live in the Mid­dle East, in­clud­ing nearly 1.4 mil­lion in the UAE. The money they send back is a vi­tal source of for­eign cur­rency in Pak­istan, where re­serves have plunged to the low­est in al­most four years.

Mr Khan’s govern­ment has al­ready con­sid­ered is­su­ing new bonds to at­tract in­vest­ment from over­seas.

Pak­istan’s fi­nan­cial cri­sis has led to its cur­rent ac­count and bud­get gaps widen­ing, leav­ing the coun­try need­ing to ur­gently raise up to $12bn.

“The sheer quan­tity in which the govern­ment needs re­sources is so large that no sin­gle bi­lat­eral part­ner can ac­tu­ally ar­range for the en­tire amount,” said Khur­ram Hu­sain, busi­ness ed­i­tor at Pak­istan’s lead­ing English news­pa­per Dawn.

The fail­ure has left Mr Khan at the mercy of the IMF, which is ex­pected to de­mand painful re­forms to break Pak­istan’s boom and bust cy­cle. The fund will be wary of Is­lam­abad’s fail­ure to meet the con­di­tions of past loans and the US will have a large say in lend­ing.

“To­day’s White House looks at Pak­istan with great dis­ap­point­ment and they have made that dis­ap­point­ment clear,” Hu­sain said. “Clearly, that un­hap­pi­ness is go­ing to spill over into the IMF pro­gramme.”

Jeremy Zook, as­so­ci­ate di­rec­tor of Fitch Rat­ings, said: “I think the ne­go­ti­a­tions for an IMF pro­gramme will be quite tough this time. I think the cur­rent US ad­min­is­tra­tion has a large say in IMF lend­ing poli­cies so I think they are likely to put a sig­nif­i­cant amount of pres­sure on Pak­istan.”

Cuts to pub­lic spend­ing, de­val­u­a­tion of the ru­pee, end­ing sub­si­dies to ail­ing state busi­nesses and in­creas­ing taxes are all likely to be con­di­tions of a bailout.

All of that will hit Mr Khan’s high-spend­ing cam­paign prom­ises.

“His­tory tells us that whichever govern­ment has un­der­taken the kind of macroe­co­nomic sta­bil­i­sa­tion that this govern­ment is about to un­der­take has paid a heavy, heavy cost po­lit­i­cally,” Hu­sain said. “They are go­ing to pay a very steep price in terms of their pop­u­lar­ity.”

Pak­istan’s fi­nances are likely to get worse be­fore they get bet­ter, and ne­go­ti­a­tions with the IMF could take months, said Charles Robert­son, global chief econ­o­mist at Re­nais­sance Cap­i­tal.

“I have to say I have a some sym­pa­thy for Im­ran Khan,” he said. “No one should want to take power against such a tough back­drop where the first thing you be­tray are your prom­ises to your vot­ers.”

AFP

Pak­istani Prime Min­is­ter Im­ran Khan has had to re­verse an election prom­ise that he would not go to the IMF for money, af­ter China and Saudi Ara­bia baulked at his loan re­quests

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