China vows to help cash-strapped Pakistan
Saturday, 18 October 2008
BEIJING, October 17, (AFP): China has vowed to do what it could to help cash-strapped Pakistan avert financial disaster as Islamabad's leader -- President Asif Ali Zardari -- continued an official visit aimed at rustling up crucial Chinese investments.
Pakistan needs about $10 billion to avoid defaulting on its debts and stave off the immediate threat of bankruptcy. This sum is only 0.3 per cent of the amount now devoted to saving the global financial system.
The Chinese promise came as Premier Wen Jiabao met Pakistani President Asif Ali Zardari, who is on his first official visit abroad after being elected in September.
"As a long friend of Pakistan, China understands it is facing some financial difficulties," foreign ministry spokesman Qin Gang told reporters.
"We're ready to support and help Pakistan within our capability."
Zardari met Chinese counterpart Hu Jintao last Wednesday in a meeting in which the two sides pledged to strengthen decades-old ties and signed 11 bilateral agreements, one on unspecified economic cooperation.
However, Qin offered no specifics on the form that Beijing's financial help would take.
China's state news agency Xinhua late Thursday released the full text of a joint statement between China and Pakistan which covered economic cooperation and foreign policy issues but was short on details.
"Pakistan appreciated the strong support and assistance provided by the government and people of China to Pakistan in its economic development," the joint statement said.
Pakistan's ambassador to China, Masood Khan, said earlier this week in an interview with Pakistan television station Geo an agreement on a civilian nuclear pact with China could be reached during the trip.
But Qin declined to give any details on the agreements made so far.
An FT Syndication report by Farhan Bokhari in Islamabad and Mure Dickie in Beijing adds: China has assured Pakistan it will not allow its south Asian ally to be forced to default on upcoming international debt payments, according to Pakistani officials.
Such a pledge would offer a potentially crucial boost to Pakistan, which faces a $10bn (euro7.5bn, £5.8bn) gap in external financing in the financial year to June 2009, amid a falling currency and declining liquid foreign currency reserves.
One senior Pakistani government official said Beijing's backing "begins with $500m with the promise to go upwards".
"The message from Beijing was strong, precise and reassuring to our side," a second Pakistani official said.
Chinese foreign ministry officials on Thursday repeatedly declined to comment on whether Beijing had promised any financial assistance or signed an agreement sought by Islamabad on expanded co-operation on nuclear power.
In a meeting on Thursday, Wen Jiabao, Chinese president, assured Mr Zardari that Beijing would "continue to offer all possible assistance to help Pakistan overcome its current economic difficulties and strengthen its self-development capacity", Chinese state media said, but gave no details of what assistance China was ready to offer.
Any commitment to large scale assistance to Pakistan would be likely to prompt other nations threatened by the widening impact of the global financial crisis to step up efforts to win Chinese support.
It could also increase pressure on Beijing to take part in any international effort to make emergency funds available to the crisis-hit economies. A number of Pakistan's economic indicators such as the level of liquid foreign currency reserves and the exchange rate of the rupee versus the US dollar, have recently deteriorated, prompting widespread worries over its economic prospects.
China has more than $1,900bn in foreign exchange reserves. However, some Chinese scholars have said that the level of support that Beijing can give Pakistan and other nations is limited, since China remains a developing country with widespread domestic poverty and huge developmental challenges.
While Beijing has been publicly reticent about how willing it might be to shore up Pakistan's financial position with soft loans, the two Asian neighbours and long-time allies have signed a raft of agreements during Mr Zardari's visit.
The deals include expansion of a trade agreement, co-operation on environmental protection and plans for China to build and launch a communications satellite for Pakistan.
Islamabad also yearns to seal a formal pact expanding co-operation with Beijing on the development of Pakistan's nuclear power industry, but Chinese officials on Thursday declined to comment on whether such a deal had already been signed or would be in the future.
Singapore and Malaysia on Thursday pledged to guarantee all local and foreign currency bank deposits, joining governments across the world in shoring up confidence in the embattled banking system.
The neighbouring south-east Asian countries announced within minutes of each other they would guarantee bank deposits until December 2010.
Meanwhile, Susilo Bambang Yudhoyono, the president of Indonesia, on Thursday added to calls for the south-east Asian nations to hold a summit in Beijing next week to discuss a coherent response to, and measures to deal with, the global financial crisis.
Pakistan needs about $10 billion to avoid defaulting on its debts and stave off the immediate threat of bankruptcy. This sum is only 0.3 per cent of the amount now devoted to saving the global financial system.
The Chinese promise came as Premier Wen Jiabao met Pakistani President Asif Ali Zardari, who is on his first official visit abroad after being elected in September.
"As a long friend of Pakistan, China understands it is facing some financial difficulties," foreign ministry spokesman Qin Gang told reporters.
"We're ready to support and help Pakistan within our capability."
Zardari met Chinese counterpart Hu Jintao last Wednesday in a meeting in which the two sides pledged to strengthen decades-old ties and signed 11 bilateral agreements, one on unspecified economic cooperation.
However, Qin offered no specifics on the form that Beijing's financial help would take.
China's state news agency Xinhua late Thursday released the full text of a joint statement between China and Pakistan which covered economic cooperation and foreign policy issues but was short on details.
"Pakistan appreciated the strong support and assistance provided by the government and people of China to Pakistan in its economic development," the joint statement said.
Pakistan's ambassador to China, Masood Khan, said earlier this week in an interview with Pakistan television station Geo an agreement on a civilian nuclear pact with China could be reached during the trip.
But Qin declined to give any details on the agreements made so far.
An FT Syndication report by Farhan Bokhari in Islamabad and Mure Dickie in Beijing adds: China has assured Pakistan it will not allow its south Asian ally to be forced to default on upcoming international debt payments, according to Pakistani officials.
Such a pledge would offer a potentially crucial boost to Pakistan, which faces a $10bn (euro7.5bn, £5.8bn) gap in external financing in the financial year to June 2009, amid a falling currency and declining liquid foreign currency reserves.
One senior Pakistani government official said Beijing's backing "begins with $500m with the promise to go upwards".
"The message from Beijing was strong, precise and reassuring to our side," a second Pakistani official said.
Chinese foreign ministry officials on Thursday repeatedly declined to comment on whether Beijing had promised any financial assistance or signed an agreement sought by Islamabad on expanded co-operation on nuclear power.
In a meeting on Thursday, Wen Jiabao, Chinese president, assured Mr Zardari that Beijing would "continue to offer all possible assistance to help Pakistan overcome its current economic difficulties and strengthen its self-development capacity", Chinese state media said, but gave no details of what assistance China was ready to offer.
Any commitment to large scale assistance to Pakistan would be likely to prompt other nations threatened by the widening impact of the global financial crisis to step up efforts to win Chinese support.
It could also increase pressure on Beijing to take part in any international effort to make emergency funds available to the crisis-hit economies. A number of Pakistan's economic indicators such as the level of liquid foreign currency reserves and the exchange rate of the rupee versus the US dollar, have recently deteriorated, prompting widespread worries over its economic prospects.
China has more than $1,900bn in foreign exchange reserves. However, some Chinese scholars have said that the level of support that Beijing can give Pakistan and other nations is limited, since China remains a developing country with widespread domestic poverty and huge developmental challenges.
While Beijing has been publicly reticent about how willing it might be to shore up Pakistan's financial position with soft loans, the two Asian neighbours and long-time allies have signed a raft of agreements during Mr Zardari's visit.
The deals include expansion of a trade agreement, co-operation on environmental protection and plans for China to build and launch a communications satellite for Pakistan.
Islamabad also yearns to seal a formal pact expanding co-operation with Beijing on the development of Pakistan's nuclear power industry, but Chinese officials on Thursday declined to comment on whether such a deal had already been signed or would be in the future.
Singapore and Malaysia on Thursday pledged to guarantee all local and foreign currency bank deposits, joining governments across the world in shoring up confidence in the embattled banking system.
The neighbouring south-east Asian countries announced within minutes of each other they would guarantee bank deposits until December 2010.
Meanwhile, Susilo Bambang Yudhoyono, the president of Indonesia, on Thursday added to calls for the south-east Asian nations to hold a summit in Beijing next week to discuss a coherent response to, and measures to deal with, the global financial crisis.