KARACHI 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 Pakistans 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 governments 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 per cent 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. `The financing gap is much larger and so we will require additional funding,` he said.
The IMF estimates the financing gap of Pakistans 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.
IMF AGREEMENT FIRST
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.
Another analyst said bilateral help, such as a Saudi oil facility, was expected to be part of an IMF programme that Pakistan would have to agree to first.
`Pakistan will have to sign the IMF programme and in that deal, it seems an oil facility will be part of it as well,` said Muzzamil Aslam, an economist at KASB Securities Ltd.
Analysts say deferred payments on a third of oil from Saudi Arabia, as requested, would provide relief of up to $1.8 billion a year on its balance of payments, at current oil prices.
Pakistans total oil import bill was $1.47 billion in September, compared with $520 million in the same period last year, according to central bank data.
The Nation newspaper, citing unidentified sources, reported on Thursday that Saudi Arabia had agreed to give Pakistan $4 billion and to supply oil for one year on deferred payments.
The newspaper said the Saudi assistance would be announced at a meeting of Pakistans allies and potential donors in Abu Dhabi on Nov. 17. The so-called Friends of Pakistan meeting will include Saudi Arabia, China and the United States.
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