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November 04, 2008 16:24 IST
In a last-ditch effort to put off seeking financial assistance from the International Monetary Fund, Pakistan President Asif Ali Zardari is expected to strive for oil against deferred payment from traditional ally Saudi Arabia to bailout his economically sinking country.
Zardari, on his maiden visit to the kingdom after becoming president is scheduled to arrive in oil-rich Arab on Tuesday and is expected to ask the Saudi government to restore the special oil facility that was extended to Pakistan after it faced economic sanctions in the wake of its 1998 nuclear tests.
The Saudis then provided 80,000 barrels of oil a day and the facility was continued till 2002.
A large Pakistani delegation travelled to Riyadh on Monday ahead of Zardari's arrival for talks with their Saudi counterparts.
Zardari is also expected to seek Saudi support for the Friends of Pakistan initiative. Experts have said Pakistan immediately needs up to $10 billion to avert a balance of payments crisis and the government will soon have to take a decision on approaching the IMF for a loan.
However, Islamabad has been loath to seeking help from the IMF because of the stringent conditions, including a possible cut in the defence budget, which would accompany such assistance.
Though Saudi Arabia has often helped Pakistan tackle its financial problems in the past, aid has not been forthcoming since the ruling coalition led by Zardari's Pakistan People's Party came to power in March.
The Saudi authorities have not responded to Pakistan's earlier requests for oil against deferred payments despite visits to that country by senior Pakistani ministers.
Diplomats told the influential Dawn newspaper that the 'lack of warmth' in bilateral ties could be attributed to 'Saudi unease' over the Friends of Pakistan initiative, Pakistan request for an oil facility from Iran, a realignment of Saudi goals in the region and political changes in Pakistan.
Meanwhile, Pakistan will finalise its talks with the IMF by November 10 and the world body's board is likely to take up the country's case for approval of a bail-out package, said Shaukat Tarin, the Advisor on Finance to the prime minister.
"We will finalise all matters with IMF after holding a second round of talks by November 10," Tarin told Business Recorder newspaper.
Pakistan will be required to pay 3.5 to four per cent interest on a 20-month facility. Tarin said he needs to resolve with the IMF's managing director the percentage increase in the State Bank of [Get Quote] Pakistan's policy rate and its timing.
The IMF's technical team wants it to be an action prior to the release of funds while Pakistan is insisting that its need should be determined keeping the prevailing liquidity conditions after taking into account the level of uncertainty.
Pakistan has finalised issues at the technical level and Tarin will meet IMF officials and sign the letter of intent during the final round of talks.
The signing of a letter of intent would mean the Pakistan government would assure the IMF of implementing all agreed conditions.
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