Staring at a financial crisis, Pakistan's new PM Imran Khan asks overseas citizens for funds

• Khan, who was sworn in a few days ago, made a televised speech asking overseas Pakistanis to send money back to the country in the form of investments and remittances.
  
• It has been estimated that the country needs a cash infusion of around $12 billion to stay afloat.
  
• Khan is wary of raising funds from a financial institution like the IMF, and could instead seek help from China and Saudi Arabia.

Pakistan’s new prime minister, Imran Khan, has his immediate task cut out for him - to fix the country’s dire finances. And rather than making a plea to global institutions like the International Monetary Fund (IMF) or Chinese creditors, he’s calling on Pakistani citizens abroad to contribute to the country’s foreign reserves.

In a bid to stave off a financial crisis, Khan, who was sworn in a few days ago, made a televised speech asking overseas Pakistanis to send money back to the country in the form of investments and remittances. It has been estimated that the country needs a cash infusion of around $12 billion to stay afloat.

Pakistan’s fiscal and trade deficits have skyrocketed as imports have far exceeded exports, tax collection has been poor and the currency has already been devalued four times since December 2017. The country has also been saddled with billions of dollars worth of debt as a result of the China-Pakistan Economic Corridor (CPEC), a $62 billion infrastructure programme spearheaded by China.

Khan is wary of raising funds from a financial institution like the IMF, which has bailed Pakistan out many times before in the past, owing to the stringent conditions that come with such a programme such as - spending restrictions and a limit on bond issues. His party, Tehreek-e-Insaf, has, instead, suggested it could raise funds from China or Middle Eastern allies or get Pakistani citizens abroad to subscribe to a government bond issue.

For its part, the IMF, along with the White House, have been wary that a bailout for Pakistan could be used by the government to pay back its Chinese loans. Meanwhile, Chinese banks are also wary at the prospect of extending further loans to Pakistan owing to the currency crisis and volatility in emerging markets.

In a heartening sign for the new prime minister, remittances in July were up by 21% to $1.9 billion in July 2018, partly owing to the country’s tax amnesty scheme for foreign assets. Most of the country’s remittances come from Gulf countries like Saudi Arabia and the UAE, and with oil prices having regained momentum in the recent past, the growth in remittances is likely to continue.

Khan will look to take advantage of this. As he embarks on a five-year term, he will likely woo as many overseas Pakistanis as he can with repatriation and investment schemes. His government’s ability to spend and manage the country might just depend on it.