Ishaq Dar, the finance minister, approved the raising of $2 billion from Pakistanis living abroad on Thursday in order to aid the nation in exiting its current economic quagmire.
Bashir Farooqi, chairman of the Saylani Welfare International Trust, requested the finance minister’s approval while speaking at a conference on “Defining a roadmap for Islamization of Pakistan’s economy” in order to voluntarily raise $2 billion from Pakistanis living abroad using the charity’s global welfare network.
Dar, who could be reached via a video conference link, gave the State Bank of Pakistan (SBP) instructions to provide proof of the anticipated debt increase. The transaction should be transparent, and well documented and there should be a well-defined method to raise the debt, said the finance czar.
Farooqi said that a five-year, interest-free debt issue will be made, with the trust transferring the proceeds to the government.
The trust’s chairman continued, “The government may utilize it to clear import items delayed at Karachi port due to the poor availability of foreign exchange reserves at this time.”
The most obvious indication yet that the nuclear-armed nation risks defaulting unless it receives enormous backing is Pakistan’s full-blown economic upheaval, which includes its largest-ever currency devaluation and a wave of emergency spending cuts.
With just $3.7 billion in reserves left after last year’s devastating floods, the nation is on the verge of collapse just before fiercely contested elections are coming in November. This is just enough money for three weeks’ worth of necessary imports.
It urgently needs the IMF to pay an overdue tranche of $1.1 billion, as there is still $1.4 billion left in a stalled bailout program that is scheduled to finish in June. Despite the fact that an emergency IMF mission has arrived in Pakistan, there are no guarantees given the mounting problems following the suspension in November of payments under the current package, which was increased to $7 billion following the floods.
A devaluation of 15% in the rupee and a rise last week in fuel prices could help eliminate some key snags, particularly as tax measures are apparently imminent. However, because the bailout package cannot be prolonged through June and elections are approaching, pressure is mounting.