Pakistan’s government has finally admitted it needs help and its Finance Minister, Asad Umar, said he would be meeting International Monetary Fund (IMF) officials on the sidelines of its annual meeting Bali this weekend. There he will try and work out the terms for a bailout that would cover a $10 billion hole in Pakistan’s financing needs.
The decision is a bit humiliating for the new Prime Minister, Imran Khan, an anti-Western firebrand like every other Pakistani leader before him. More importantly, the process is likely to be a window into what’s wrong with China’s Belt and Road infrastructure initiative.
Pakistan has had to seek bailouts 10 times since 1990 and still owes money from the last time it needed a handout. Khan was wise to approach the IMF early enough in his tenure that he can blame the previous government and accuse it of mismanagement.
Pakistan’s problem is due to the deals the preceding administration struck with China. A few years ago, the Chinese President, Xi Jinping, promised to invest $60 billion into Pakistan’s economy. Since then, Pakistanis have hoped that money would fund the power and transport infrastructure that could jump-start growth.
The China-Pakistan Economic Corridor, hailed as the most crucial leg of the Belt and Road, has proved to be more expensive than expected. Machinery imports for Chinese projects caused Pakistan’s current account deficit to rise by over 50 percent and Islamabad has struggled to pay for all this.