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Pakistan needs IMF bailout, panda bond issue, Habib Bank CEO says

Reuters  |  BEIJING 

By and Tony Munroe

(Reuters) - needs to seek a bailout from the (IMF) and make "hard decisions" to avoid going back again, said Muhammad Aurangzeb, of Habib Ltd, the country's biggest lender.

The is also urging to tap China's nascent "panda bond" market, which enables overseas issuers to raise yuan-denominated bonds there, as soon as possible after IMF funding is secured.

"They are clearly very interested, because the overall stance the current government has is to move and diversify away from USD into RMB," Aurangzeb told in an interview in on Tuesday.

The potential size of panda bond issuance would be equivalent to $1.5 billion to $2 billion, he said. Development and International Capital Corp would be HBL's domestic partners on such a project.

Habib Bank received an RMB license from two weeks ago and is seeking approval to upgrade its office in the Chinese capital to a branch as soon as next year, he added.

An IMF rescue package would be Pakistan's 13th from the multilateral lender since the late 1980s.

"The advantage of a programme which IMF brings to the table is that it pushes the government to bring in their fiscal discipline and move with the reform agenda," Aurangzeb said.

Last month, received a $6-billion rescue package from Saudi Arabia, but officials say it still plans to seek a bailout from the IMF to avert a balance of payments crisis.

Pakistan's foreign reserves have plunged 42 percent since the start of the year to about $8 billion, or less than two months of import cover.

"Both on the fiscal side and on the current account side, some very tough political choices need to be made," said Aurangzeb.

These include moves to increase the tax base, boost exports - particularly to neighbouring China, let the currency find its fair market value, actively work to narrow deficits, and get the structural reforms agenda going, he said.

"If they can do that, they can get on a more sustainable path without relying on the IMF," Aurangzeb said. "But if they don't follow through, the likelihood is that there will be another (IMF) programme."

The focus of new Pakistani Imran Khan's talks with Beijing is less about debt or loans, and more about increasing investment, industrial activity, exports to China, and the creation of local jobs, Aurangzeb said.

Khan began a visit to late last week.

Though China is Pakistan's closest ally, Khan has sought to rethink a signature project, the $60-billion China-Pakistan Economic Corridor, a flagship of Beijing's vast Belt and Road Initiative.

(Reporting by and Tony Munroe; Editing by Clarence Fernandez)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, November 06 2018. 16:03 IST
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