Given the current ‘political realities’, Pakistan seems to have little option but to go to the IMF. But the truth is Pakistan can raise $5 billion in the next 30 days if it wants to; even if Saudi Arabia does not extend oil credit facility.

The United States wants Pakistan to work with the IMF and the government does not want to upset Washington. Otherwise why would it sit on proposals (like the exchangeable bonds and the securitisation of remittances) for months that could have raised a few billion dollars? The proposal from the Chinese to buy minority stake in the National Bank of Pakistan, likewise, was put in cold storage.

Raising $5 billion will take Pakistan’s foreign exchange reserves to about $12 billion. This would represent a comfortable level of four months worth of next 12 months of imports as Pakistan’s annual import bill is likely to drop sharply to $33 billion from $40 billion in FY 2007-08 due to the collapse of the price of oil and these of other commodities such as edible oil. Four months of import cover is considered a reasonable level and the country can use this time to take steps, such as privatisation or joint ventures in strategic areas, to mobilise funds for its medium- term needs.

Just consider the following four of the many ways the government can use to raise $5 billion for meeting the current crunch. These are not necessarily the most desirable options but are far better than carrying a begging bowl around the world.

— Pakistan has about $1.8 billion in gold reserves. Borrowing or leasing against gold is a standard international practice. Pakistan can borrow for six months at the rate of around 2.1 per cent from the central bank of a friendly country such as the United Arab Emirates. India did this in 1991 for a short period.

— Pakistan can borrow (not beg) at least US$1.5 billion from China on commercial terms by putting its shares in large government-owned corporations as collateral. China has, in the past year, extended loans to other countries (e.g. Congo) on the basis of proper collateral. The cost of loans secured against collateral can be significantly cheaper compared with other options.

— Pakistan can get another $800 million in a few days if the US reimburses the remaining amount for 2008 it should pay under the Coalition Support Fund relating to expenditure incurred on combating terrorism. Pakistan has received only one instalment ($364.7 million in September 2008) for this year’s expenses. A senior military source told Internews that the amount for reimbursement was calculated on the basis of six-monthly reports. He said all bills related to the expenditure had been audited jointly by a team of Pakistani military officers and the US embassy.

— Mr Shaukat Tareen, the Finance Adviser, said on Oct 20 that the government would move ahead on remittances securitisation without any delay. Countries like Brazil and Turkey have used this to raise billions of dollars in foreign currency funding over the years. Pakistan can probably raise $500 million but the question is: has the government moved?

And here is something the US can arrange to do in the next 48 hours if it is really serious about helping Pakistan.

On Oct 29, the US Federal Reserve agreed to provide $30 billion each to the central banks of Brazil, Mexico, South Korea and Singapore, expanding its effort to unfreeze money markets to emerging nations for the first time. The Fed set up “liquidity swap facilities with the central banks of these four large systemically important economies” effective until April 30, the Fed said in a statement. The arrangements aim “to mitigate the spread of difficulties in obtaining US dollar funding”.

Earlier on Sept 24, the Fed had extended similar facilities of $10 billion each to the central banks of Australia, Denmark, Norway and Sweden in exchange for their currencies.

These swap facilities — granted against another currency or a government bond — are meant to ease short-term liquidity needs (from a week to a few months) and do not require approval of the US Congress.

Pakistan does not need $30 billion. If the US Fed can extend a facility of even just a billion dollar against Pakistan government bonds, it will go a long way in stabilising the Rupee and the market sentiment. But only if the US wants to help – not through ‘aid’ but just through market means.