The head of the International Monetary Fund (IMF) said she is sending a team to Pakistan in the coming weeks after the government requested emergency bailout loans.
IMF Managing Director Christine Lagarde made the statement on October 11 after meeting with Pakistani Finance Minister Asad Umar and Central Bank Governor Tarik Bajwa on the sidelines of a conference in Indonesia.
"During the meeting, they requested financial assistance from the IMF to help address Pakistan's economic challenges," Lagarde said. "An IMF team will visit Islamabad in the coming weeks to initiate discussions for a possible IMF-supported economic program. We look forward to our continuing partnership."
If a package is agreed, it would be Pakistan's 13th IMF bailout since 1988. The fund most recently lent Islamabad $6.7 billion in 2013.
Pakistani Prime Minister Imran Khan said earlier this week that he would seek about $12 billion in assistance from the IMF and "friendly nations" such as China and Saudi Arabia to address a rapidly growing balance of payments crisis.
The announcement prompted opposition lawmakers in Islamabad to stage a sit-in outside the parliament building on October 11 to protest the decision.
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Pakistan Opposition Protests IMF Talks
Both Beijing and Riyadh are already heavily invested in transportation and energy projects in Pakistan, which is one of the biggest borrowers in China's Silk Belt and Road initiative.
China has pledged more than $60 billion in the form of loans and investments to build a transportation network from western China through Pakistan to the Indian Ocean, but Pakistan has not disclosed details about the loans it has received.
The United States, which exerts considerable influence over the IMF, has criticized China's infrastructure lending, warning that it has saddled some developing countries with debts that they cannot afford to repay.
U.S. Secretary of State Mike Pompeo has said there would be "no rationale" for an IMF bailout of Pakistan that is used to essentially refinance and pay off Islamabad's debts to China.
Apparently with that objection in mind, Lagarde said that, in considering new loans for Pakistan, the IMF would "need to have a complete understanding and absolute transparency about the nature, size, and terms of the debt that is bearing on a particular country."
Pakistan's currency plunged by around 7 percent earlier this week after word of the loan request was made public. The 26 percent drop in the currency's value since last year has caused prices of basic goods to go up, angering many in Pakistan.
Khan when he took office vowed to curb borrowing in light of the heavy borrowing by the previous government. But he said this week that a looming financial crunch -- with the country barely having enough foreign exchange reserves to pay its debts -- forced him to seek further assistance.
Any loan deal reached with the IMF might involve the restructuring of some of Pakistan's foreign debt, a Pakistani minister told Reuters.
"It's in very initial stages, the negotiations haven't started or matured yet, but this is something that we may look towards," Muhammad Hammad Azhar, State Minister for Revenue, said.
Critics have warned Pakistan that its budget deficit, which hit 6.6 percent of economic output in the last year, was unsustainable.
"We do have extremely high deficits," Azhar told Reuters. "Unless we restructure the debt, the burden will mount."