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Pakistan-China in talks to expand cooperation as Islamabad battles economic challenges

Pakistan is in talks with China to expand cooperation as Islamabad struggles to implement growth-oriented policies after avoiding a debt default earlier this year.

A file photo of Pakistani and Chinese flags displayed along a road in Islamabad. (Reuters)

“We are having a very broad-based conversation” that goes “beyond debt issues,” Pakistan’s acting Prime Minister Anwaar-ul-Haq Kakar said Thursday in an interview with Bloomberg Television in New York.

Kakar, whose interim government is mandated to govern the country until elections scheduled for early next year, said China is evaluating what kind of “intervention would be helpful for our economic health.”

The talks between the nations come after Pakistan secured a $3 billion loan program with the International Monetary Fund in July, after months of delays that brought it closer to default. China has financed billions of dollars in power plants in Pakistan as part of the Belt and Road Initiative and has provided loans to the country while negotiations with the International Monetary Fund were ongoing.

Kakar took office last month after former prime minister Shehbaz Sharif handed over power at the end of parliament’s five-year term. Kakar has since introduced economic reform aimed at shoring up the country’s finances, including proposed privatization of state assets and a crackdown on illegal dollar trading.

Kakar said his interim government is determined to strengthen governance and curb cartels and mafias operating in everything from illegal currency trading to fuel and electricity theft.

The goal is to “break the artificial bubble of inflation, the artificial value of the currency, which was driven primarily by demand in the illegal currency trade,” he said.

Facing protests

The interim government has faced protests over increases in energy and fuel prices, which have helped fuel Asia’s fastest inflation. Still, Kakar said he did not foresee “enormous social unrest” following the electricity price increases, as consumption was expected to decline in the winter months.

Kakar said his government was working to provide more lasting solutions to the country’s power sector.

“We are trying to privatize the transmission companies, we are trying to increase our tax net so we are not dependent on indirect taxes that are accruing to all these electricity bills,” Kakar said.

Asked whether his government would be able to complete the sale of some state-owned companies in the energy sector during his term, Kakar said he was optimistic.

“I’m talking specifically about the power sector, the broadcasters across the country,” Kakar said. “We hope that some of them will be privatized in a couple of months.”

Pakistan has also been working to attract investments from Gulf nations in the mining, agriculture and technology sectors. Kakar recently said his country could attract $50 billion in investments from Saudi Arabia and the United Arab Emirates.

He said that “$50 billion is just a figure, which I did mention, but it could be higher. If they see more business opportunities and there is more to offer from our side, it could probably exceed that number.”

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