Daily Times

With fiscal and humanitarian crises bringing us closer to the brink, we are teetering on the edge of collapse yet again, and this time, China appears to be the answer to all our prayers. In the midst of negotiating a bailout from the IMF, something we have done 20 times before, our foreign reserves have plummeted to record lows, leaving us with no money to finance our colossal balance of payments deficit.

From Karachi to Lahore, poorer people everywhere are bearing the brunt as inflation touches every staple in the country-thousands of food containers lie stranded at ports as the government curbs imports to preserve the last of its reserves, a man was literally crushed to death after a crowd rushed officials distributing subsidised flour. Decades of successive governments living beyond their means have caught up with us at last.

What we really need is a hard reset, but that simply isn’t possible without even more foreign assistance which is what created this mess in the first place. Our dependence on imports and a low inflow of dollars has triggered a repeated balance of payments crises, resulting in piles of debt and no foreign exchange. But without foreign intervention, the country risks debt default. Right now, the priority is to secure yet another loan from China as part of its $2bn commitment to the country. The funds will provide much-needed relief for a nation that needs to service about $7 billion worth of repayments in the next few months, which is also incidentally crucial to unlocking its $6.5 billion loan from the IMF. Currently, around 30 per cent of Pakistan’s foreign debt is owed to China, a situation that has likely been exacerbated by our recent requests for a loan,

Meanwhile, China is busy fighting a battle against debt restructuring, a crucial mechanism for helping low-income countries that have spiralled into crisis owing to higher US interest rates and a stronger dollar. But China, the world’s largest sovereign creditor, has historically been reluctant to restructure loans, instead preferring to extend new credit. With each successive loan Pakistan accepts, it pulls itself further into a vicious cycle of dependence that can only be remedied through self-sufficiency. *