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NEW YORK -- Pakistan's most powerful man has reached out to Washington to request help in securing an early loan dispersal from the International Monetary Fund, Nikkei Asia has learned, as dwindling foreign reserves spark a scramble in Islamabad to avoid a default.
Gen. Qamar Javed Bajwa, the chief of Pakistan's influential army, spoke by phone with U.S. Deputy Secretary of State Wendy Sherman in a highly unusual move earlier this week, according to sources from both the U.S. and Pakistan.
The sources, who requested anonymity because they were not authorized to speak publicly, said Bajwa made an appeal for the White House and Treasury Department to push the IMF to immediately supply nearly $1.2 billion that Pakistan is due to receive under a resumed loan program.
Though Pakistan has an experienced administrator in Prime Minister Shehbaz Sharif, he does not have much credibility or political capital beyond Islamabad, and faces persistent pressure from ousted rival Imran Khan. Instead, observers say power lies with Gen. Bajwa, 61, an infantry officer who was supposed to retire three years ago but who managed to stay on through years of backroom politicking.
The IMF already granted Pakistan "staff-level approval" for the loan in question on July 13. But the transaction -- part of the IMF's $6 billion Extended Fund Facility for Pakistan -- will only be processed after the multilateral lender's executive board grants final approval.
The IMF is going into recess for the next three weeks and its board will not convene until late August. No firm date has been set for announcing the loan approval for Pakistan, according to an IMF official who also spoke on condition of anonymity.
For Islamabad, time is of the essence.
Without an immediate lifeline, the inflation-ravaged Pakistani economy will continue to hemorrhage. The rupee has been plummeting against the dollar, and the country has less than $9 billion in foreign reserves left, covering under two months of import bills. On Thursday, S&P Global downgraded Pakistan's outlook to negative from stable.
According to the IMF official, there is a major difference between staff-level approval and board approval. "Our stakeholders, the countries that take the vote as to whether they are supporting this or not, make the final decision," said the official. "This is a difference. So the legally binding step is a board approval, not the staff level agreement."
The U.S. is the largest shareholder in the fund, founded in 1945. While Washington has voted for funding Pakistan in the past, the Trump administration openly expressed its reservations about the country using IMF loans to pay back China.
With comparisons being drawn to Pakistan's crisis-plagued neighbor Sri Lanka, the stakes of default for the nuclear-armed Islamic republic are higher. Pakistan has a massive population of over 220 million; has borders with China, India, Iran and Afghanistan; is fighting Islamist as well as separatist insurgencies; and sits on the intersection of the Persian Gulf and the Indian Ocean.
Bajwa's appeal comes in the wake of separate meetings between senior civilian Pakistani and American officials in July, none of which managed to negotiate an early disbursement of funds.
"Several senior Pakistani officials have met with U.S. and other key stakeholder nations in the IMF and World Bank in the past week to register concerns about the timing of IMF Executive Board decisions, pressing to expedite review of Pakistan's progress on prior actions," said an official familiar with the proceedings.
According to sources, the lack of progress in those meetings spurred Gen. Bajwa, commander of the 650,000-strong military, to get Washington's attention when other emissaries could not deliver.
"This reflects the Pakistan army's concerns about the state of the economy," said Hussain Haqqani, Pakistan's former ambassador to Washington and currently the director for South and Central Asia at the Hudson Institute in Washington. "It also reflects that the Pakistan army chief is the authority with whom the global players feel the final word rests."
Pakistan is one of the world's most bailed-out countries. Since 1958, the country has embarked on 22 separate IMF programs but completed just one. That was in the 2000s, when it was being ruled by a military regime.
Haqqani said the country has developed a habit of getting on an IMF plan, getting quick access to a couple of tranches, but then abandoning the deals without making the important structural and systemic changes required for further financing. This has left Pakistan little leverage with international financiers.
"The reason why the IMF program has been delayed is because Pakistan has a track record of not keeping its word with the IMF," Haqqani said.
"Gen. Bajwa calling the U.S. administration, if he has done so, suggests that he is assuring the U.S. -- and through the U.S. the IMF -- that any promises made will be kept."
As the rupee continued to touch all-time lows -- its worst performance since 1998, when Pakistan tested nuclear weapons and lost investor confidence -- it was not immediately clear if Gen. Bajwa had managed to convince the U.S. administration.
However, while officials familiar with the exchange admitted that the currency and foreign reserves situations were worrisome, they also reported progress on the IMF finance facility.
"If the government can get through this tough month, there are good opportunities to stabilize the economy, but August will not be easy," one official said.
Meanwhile, in public, the governor of Pakistan's central bank has insisted that the fear of default is overblown. Gov. Murtaza Syed has told media that financing needs for the next 12 months will be met. He has admitted that Pakistan would rather get the IMF funding sooner rather than later, but also detailed that Islamabad is negotiating with Saudi Arabia and China -- two countries that Gen. Bajwa visited recently -- to score supplemental financing.
Normally, it does not fall upon a country's top military brass to persuade international lenders and diplomats on an economic bailout. But there is nothing normal about Pakistan's circumstances.
Observers refer to the country as a "hybrid democracy" -- officially run by a parliamentary system, but with its generals weighing in heavily on matters of national interest. This arrangement has created massive gaps in governance and instability over the years, while leaving the military as the nation's most powerful institution.
When it has not run Pakistan directly -- through martial law, emergency or an abrogation of the constitution -- the military has managed to rule indirectly through the hybrid arrangement, partnered with disempowered democrats. This would appear to describe the current situation.
https://asia.nikkei.com/Politics/In...appeals-to-U.S.-in-rush-to-avoid-debt-default
Gen. Qamar Javed Bajwa, the chief of Pakistan's influential army, spoke by phone with U.S. Deputy Secretary of State Wendy Sherman in a highly unusual move earlier this week, according to sources from both the U.S. and Pakistan.
The sources, who requested anonymity because they were not authorized to speak publicly, said Bajwa made an appeal for the White House and Treasury Department to push the IMF to immediately supply nearly $1.2 billion that Pakistan is due to receive under a resumed loan program.
Though Pakistan has an experienced administrator in Prime Minister Shehbaz Sharif, he does not have much credibility or political capital beyond Islamabad, and faces persistent pressure from ousted rival Imran Khan. Instead, observers say power lies with Gen. Bajwa, 61, an infantry officer who was supposed to retire three years ago but who managed to stay on through years of backroom politicking.
The IMF already granted Pakistan "staff-level approval" for the loan in question on July 13. But the transaction -- part of the IMF's $6 billion Extended Fund Facility for Pakistan -- will only be processed after the multilateral lender's executive board grants final approval.
The IMF is going into recess for the next three weeks and its board will not convene until late August. No firm date has been set for announcing the loan approval for Pakistan, according to an IMF official who also spoke on condition of anonymity.
For Islamabad, time is of the essence.
Without an immediate lifeline, the inflation-ravaged Pakistani economy will continue to hemorrhage. The rupee has been plummeting against the dollar, and the country has less than $9 billion in foreign reserves left, covering under two months of import bills. On Thursday, S&P Global downgraded Pakistan's outlook to negative from stable.
According to the IMF official, there is a major difference between staff-level approval and board approval. "Our stakeholders, the countries that take the vote as to whether they are supporting this or not, make the final decision," said the official. "This is a difference. So the legally binding step is a board approval, not the staff level agreement."
The U.S. is the largest shareholder in the fund, founded in 1945. While Washington has voted for funding Pakistan in the past, the Trump administration openly expressed its reservations about the country using IMF loans to pay back China.
With comparisons being drawn to Pakistan's crisis-plagued neighbor Sri Lanka, the stakes of default for the nuclear-armed Islamic republic are higher. Pakistan has a massive population of over 220 million; has borders with China, India, Iran and Afghanistan; is fighting Islamist as well as separatist insurgencies; and sits on the intersection of the Persian Gulf and the Indian Ocean.
Bajwa's appeal comes in the wake of separate meetings between senior civilian Pakistani and American officials in July, none of which managed to negotiate an early disbursement of funds.
"Several senior Pakistani officials have met with U.S. and other key stakeholder nations in the IMF and World Bank in the past week to register concerns about the timing of IMF Executive Board decisions, pressing to expedite review of Pakistan's progress on prior actions," said an official familiar with the proceedings.
According to sources, the lack of progress in those meetings spurred Gen. Bajwa, commander of the 650,000-strong military, to get Washington's attention when other emissaries could not deliver.
"This reflects the Pakistan army's concerns about the state of the economy," said Hussain Haqqani, Pakistan's former ambassador to Washington and currently the director for South and Central Asia at the Hudson Institute in Washington. "It also reflects that the Pakistan army chief is the authority with whom the global players feel the final word rests."
Pakistan is one of the world's most bailed-out countries. Since 1958, the country has embarked on 22 separate IMF programs but completed just one. That was in the 2000s, when it was being ruled by a military regime.
Haqqani said the country has developed a habit of getting on an IMF plan, getting quick access to a couple of tranches, but then abandoning the deals without making the important structural and systemic changes required for further financing. This has left Pakistan little leverage with international financiers.
"The reason why the IMF program has been delayed is because Pakistan has a track record of not keeping its word with the IMF," Haqqani said.
"Gen. Bajwa calling the U.S. administration, if he has done so, suggests that he is assuring the U.S. -- and through the U.S. the IMF -- that any promises made will be kept."
As the rupee continued to touch all-time lows -- its worst performance since 1998, when Pakistan tested nuclear weapons and lost investor confidence -- it was not immediately clear if Gen. Bajwa had managed to convince the U.S. administration.
However, while officials familiar with the exchange admitted that the currency and foreign reserves situations were worrisome, they also reported progress on the IMF finance facility.
"If the government can get through this tough month, there are good opportunities to stabilize the economy, but August will not be easy," one official said.
Meanwhile, in public, the governor of Pakistan's central bank has insisted that the fear of default is overblown. Gov. Murtaza Syed has told media that financing needs for the next 12 months will be met. He has admitted that Pakistan would rather get the IMF funding sooner rather than later, but also detailed that Islamabad is negotiating with Saudi Arabia and China -- two countries that Gen. Bajwa visited recently -- to score supplemental financing.
Normally, it does not fall upon a country's top military brass to persuade international lenders and diplomats on an economic bailout. But there is nothing normal about Pakistan's circumstances.
Observers refer to the country as a "hybrid democracy" -- officially run by a parliamentary system, but with its generals weighing in heavily on matters of national interest. This arrangement has created massive gaps in governance and instability over the years, while leaving the military as the nation's most powerful institution.
When it has not run Pakistan directly -- through martial law, emergency or an abrogation of the constitution -- the military has managed to rule indirectly through the hybrid arrangement, partnered with disempowered democrats. This would appear to describe the current situation.
https://asia.nikkei.com/Politics/In...appeals-to-U.S.-in-rush-to-avoid-debt-default
