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Abu Dhabi, UAESaturday 20 October 2018

Pakistan Prime Minister Imran Khan starts Gulf trip in Saudi before UAE visit

Visits to Riyadh and Abu Dhabi are former cricket hero's first overseas since he took office

Pakistani Prime Minister Imran Khan steps off the plane in Jeddah. Saudi Press Agency
Pakistani Prime Minister Imran Khan steps off the plane in Jeddah. Saudi Press Agency

Pakistan Prime Minister Imran Khan will arrive in Abu Dhabi on Wednesday, following a landmark trip to Saudi Arabia where he was expected to seek a multi-billion dollar bailout to try to stave off economic crisis.

The former cricketer must find around $12bn to battle Pakistan's widening current account deficit and dwindling reserves.

If he fails he will likely have to approach the International Monetary Fund.

The new Pakistan premier flew to Riyadh in what was his first foreign visit since being elected in July. A bailout from the Washington-based IMF is a last resort, Mr Khan's government has said, as it instead courts its two wealthy allies, Saudi Arabia and China.

Any deal with Riyadh is likely to need assurances the kingdom can count on Pakistan's support against Iran, analysts said. Mr Khan is likely to receive the same message about Iran when he arrives in Abu Dhabi.

While Pakistan has long had frosty relations with Tehran, a recent rapprochement has caused unease in the Gulf.

"Iran-Pak ties are on the mend and the Saudis are worried about it," said Kamal Alam, a Pakistan and Middle East expert at the Royal United Services Institute.

September 18, 2018, SPA -- Pakistani Prime Minister Imran Khan, currently visiting the Kingdom, arrived in Jeddah this evening. Saudi Press Agency
Pakistani Prime Minister Imran Khan arrives in Jeddah. Saudi Press Agency

Any offer of money would come with the condition that Pakistan “lay off Iran”, he suggested.

Pakistan’s finance minister, Asad Umar, on Tuesday admitted the economic crisis was deepening before he set off to accompany Mr Khan.

Previous forecasts had been unrealistic and the budget shortfall could hit 7.2 per cent of gross domestic product, he said. The country had foreign currency reserves to cover less than two months of imports and the current account deficit could hit $21 billion this year.

Mr Umar has said the IMF, where Pakistan has already sought help a dozen times since the late 1980s, would be a "fallback option".

The US, which holds the lion's share of voting rights at the Washington-based fund, has already said it is reluctant to agree a bailout that would only pay off the interest on existing loans from China.

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Such a bailout is also likely to come with uncomfortable strings that rein in government spending and sabotage Mr Khan's ambitious health and education promises.

Possible help from the Saudis could include a large direct loan or offering oil on deferred payments, analysts have suggested.

Mr Khan was to hold talks with King Salman and Saudi Crown Prince Mohammed bin Salman.

Mr Alam said: “Definitely the economic bailout is very much high up on the agenda, but aside from that the Saudis are very worried about his pro-Iran push since he came in.

"The Saudis have always been giving the Pakistanis money, it's not new. But because Imran is reluctant to take an IMF bailout and the Americans are also not too keen on giving Pakistan money that will probably finance a Chinese debt, I think there's a bunch of things that he is hoping to do here."

September 18, 2018. Pakistan Prime Minister Imran Khan visits the Prophet Mosque in Madinah, Saudi Arabia. Saudi Press Agency
Pakistan Prime Minister Imran Khan visits the Prophet Mosque in Madinah, Saudi Arabia. Saudi Press Agency

He said Islamabad had allied with Riyadh in its rivalry with Tehran in recent decades, but there had been a recent thaw with Iran led by Pakistan's military. The reset has seen military chiefs from the country's exchange visits and Iranian foreign minister Javad Zarif has already visited Pakistan since Mr Khan's election.

The ties have worried the Saudis, who may also ask for more Pakistani support for the Saudi-led coalition fighting in Yemen, he said.

"Pakistan has said they are not going to send troops to Yemen, but Pakistani troops are on the Yemen border, so they might want some logistical support at least from Pakistan, given that the Saudis are stuck in Yemen with no way out. And they want Imran to be careful of getting too close to Iran."

He said the message would be repeated when Mr Khan visits Abu Dhabi on Wednesday.

"The UAE and the Saudis have the same policy when it comes to Pakistan," he said.

Mr Khan swept to power on populist promises to end corruption and build an Islamic welfare state.

Since taking power he has also promised an austerity drive against government waste.

His government on Tuesday announced a tax hike for middle and high-income earners and a spike in import duties on luxury products in a bid to raise more revenue additional revenue.