Cash-Strapped Pakistan Finds Few Friends in Time of Economic Need

By Mufti, Shahan | The Christian Science Monitor, October 23, 2008 | Go to article overview

Cash-Strapped Pakistan Finds Few Friends in Time of Economic Need


Mufti, Shahan, The Christian Science Monitor


With Pakistan forced to ask the International Monetary Fund (IMF) Wednesday for help avoiding bankruptcy, its government is learning that having friends in high places doesn't always pay.

Pakistan, a frontline country in fighting global Islamic militancy, counts wealthy nations like the United States, China, and Saudi Arabia among its friends - all of whom understand that Pakistan's shortage of funds will severely handicap its already weak government.

Yet its tumbling economy has caused even its strongest allies to so far resist bailing it out.

"If the economy is out of line," says Haroon Sharif, a senior adviser for the British Department for International Development in Islamabad, "any lender will think twice before handing out cash."

Pakistan, a country that had boasted some of the highest GDP growth rates in the world since 2004, now requires up to $5 billion in immediate cash injections to avoid defaulting on sovereign debt due for repayment next year.

"The government may have been counting on a bailout for a while and now that it's nowhere to be seen they're caught off guard," says Ali Cheema, the head of the economics department at the Lahore University of Management Sciences.

As late as last week Shaukat Tarin, economic adviser to the prime minister, called turning to the IMF for a loan a last resort "plan C."

This week the "Friends of Pakistan" - a group of representatives from the US, Saudi Arabia, the United Arab Emirates, Britain, France, and Japan, among others - met with President Asif Ali Zardari in Islamabad for the second time in as many months to discuss ways to keep the sinking Pakistani economy afloat.

Richard Boucher, the US assistant secretary of State for the region, who attended the meeting, warned that the US "wouldn't throw money on the table" and that there was "not going to be a cash advance for Pakistan."

President Zardari's first-ever visit to Pakistan's longtime ally China concluded last week on a similar note, as have Pakistan's talks with Saudi Arabia and the United Arab Emirates, countries that have pulled Pakistan out of similar economic trouble in the past.

Mr. Cheema says the Pakistani government might have been counting on a "democratic dividend" that didn't deliver. The government assumed that the international community would support the new democratic regime because of its security needs and regardless of its economic performance.

Pakistan has been spending far more on imports than it has been making on exports for several years. …

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