Beijing offering Pakistan a lifeline

Tough financial bind has U.S. ally
seeking bailout from China

Chinese Premier Wen Jiabao pledged to help Pakistan overcome its economic troubles, Chinese state media reported yesterday. Details were not disclosed.
Pakistani President Asif Ali Zardari was expected to seek the equivalent of $500 million or more in soft loans from its neighbour as it struggles with a financial crisis.
Wen said the countries were ready to advance their strategic relationship, a day after Zardari and President Hu Jintao signed 11 trade and economic co-operation deals.

Pakistan faces a critical balance of payments shortfall, inflation that's close to 25 per cent and has borrowed heavily from the central bank to cover a budget deficit. Analysts suggest central bank reserves are barely enough to cover two months of imports, putting Pakistan in urgent need of $3 billion to $4 billion.


Financial crisis:

Saving Pakistan comes cheap

Pakistan has timed its request for international help to perfection. In this era of multi-billion pound bailouts - with the rich world devoting perhaps £2 trillion to rescuing its devastated banks - the cost of helping out Pakistan is remarkably modest.

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President Asif Ali Zardari needs a mere £6 billion to avoid defaulting on his 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.
For the amount that Britain is prepared to spend to salvage its banks - £500 billion - Pakistan could be rescued no less than 83 times over. Since the terrorist attacks on September 11, America has given Pakistan £5 billion of aid. This is barely one per cent of the £458 billion that Washington may be forced to spend on saving Wall Street.
Bereft of oil and possessing little natural wealth, Pakistan has suffered decades of economic failure and stagnation. Ten years ago, it came within a whisker of formally defaulting on its debts and declaring itself bankrupt. So the country's leaders have become perennial seekers of bailouts.

Yet for once, the stigma attached to being an international beggar has entirely disappeared. Today, almost every government is besieged by formerly well-heeled beggars - and most are seeking far larger sums than Pakistan with its 165 million people.

In this time of crisis, saving a valued ally has never seemed so cheap.