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Saudi help 'will not solve Pakistan's cash crisis'

Cash-strapped Pakistan is seeking help from Saudi Arabia including deferred oil payments, but even if it gets that it will still need International Monetary Fund (IMF) help to fill a financing gap.

The nuclear-armed US ally is facing a balance-of-payment crisis, with foreign reserves enough to cover less than six weeks of imports, that analysts say has left it little option but to accept IMF help.
But the government has yet to make a formal request to the IMF and is holding out in the hope that allies and other multilateral lenders come to the rescue and stave off a painful IMF programme.

Big payments for oil and wheat have been major factors behind Pakistan's widening trade deficit.

On Thursday, a Farm Ministry official said the United States was expected to supply Pakistan with white wheat worth $200 million on deferred payments.

President Asif Ali Zardari and the government's top economic official, Shaukat Tarin, travelled to Saudi Arabia this week.

Tarin said on Wednesday Saudi Arabia had assured Pakistan of help, although he gave no detail of specific assistance.

Pakistan imports about 82 percent of its crude oil from Saudi Arabia but analysts said even if it were granted deferred payments, that would not be enough.

"Even if Saudi Arabia does give us the oil facility, we should still go into an IMF programme for policy discipline," said Asif Qureshi, head of research at Invisor Securities Ltd.

"The financing gap is much larger and so we will require additional funding," he said.

The IMF estimates the financing gap of Pakistan's balance of payments at up to $4.5 billion, compared with a government estimate of $3 billion for the fiscal year ending next June.

Tarin has said Pakistan needs $10 billion to $15 billion to avoid a balance of payment crisis and make adjustments over the next two years.

Saudi Arabia has deferred Pakistani oil payments before but diplomats say donors, including Saudi Arabia, want to see the government reach an agreement with the IMF before offering their own support. (Reuters)

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