Saudi Arabia and the United Arab Emirates have refused to lend money to Pakistan until it secures funding from the International Monetary Fund (IMF) first, marking a new precedent in how allies treat the South Asian nation amid its lowest economic crisis.
Following the ousting of former Pakistani Prime Minister, Imran Khan, in April and the subsequent appointment of Shehbaz Sharif to the position, the new Premier and officials visited Saudi Arabia and the UAE to improve and reset relations. Many rightly predicted, though, that they were trips to negotiate and secure funding from those Gulf allies.
According to Pakistan’s Finance Minister, Miftah Ismail, on Saturday, “We went to Saudi Arabia, Dubai and spoken to other countries – they are ready to give money, but all of them say we need to go to the IMF first.”
The Gulf monarchies’ refusals come as Pakistan is currently undergoing its worst economic crisis in decades, with the Pakistani rupee having dropped by almost 8 per cent over the past month and the country’s foreign exchange reserves having halved in less than a year. According to Bloomberg, it is now the worst economic performer in Asia.
It suffered a similar crisis back in 2018, but even then Riyadh and Abu Dhabi supplied it with funds without the condition of first going to the IMF. Now, they are acting more cautiously with regards to their support for Pakistan’s economy. Islamabad is currently in urgent need of $36 billion to avert it from a total economic collapse.
Even neighbouring China has given the same condition, Ismail said, with its Asian Infrastructure Investment Bank telling Pakistan that it will only provide funding after the World Bank does so. Beijing has also not yet fulfilled a pledge to re-issue loans to Islamabad which were repaid two months ago.