KARACHI: Pakistan has dismissed US concerns that it will use a potential International Monetary Fund (IMF) bailout to repay its debts to China.
US Secretary of State Mike Pompeo on Monday said: “We’ll be watching what the IMF does. There’s no rationale for IMF tax dollars, and associated with that American dollars that are part of the IMF funding, for those to go to bail out Chinese bondholders or China itself.”
Former Pakistani Finance Minister Dr. Salman Shah told Arab News that Pompeo’s remarks are “embarrassing” for the IMF “because it gives the impression that it’s being run as per the wishes of the US.”
Dr. Waqar Masood, former federal finance secretary, told Arab News: “The amount received from the IMF isn’t used to pay off debts. The funds are meant to build up foreign exchange reserves. This money isn’t used by the government for budgetary purposes.”
Senior economist Dr. Ikram-ul-Haq described Pompeo’s remarks as a “cheap shot” and a “political statement,” saying: “IMF money goes to increase reserves.”
Pompeo’s remarks “will not affect the prospects of getting IMF support,” he added. “In fact, by saying this, the US publicly admitted that IMF operations are part of American foreign policy matters.”
Pakistan is seeking up to $12 billion from the IMF to support its ailing economy, which is facing a high current account deficit of $18 billion, mainly due to high import bills and insufficient exports and home remittances.
The country’s foreign exchange reserves have been exhausted. At $9 billion, they are not enough to cover import requirements for two months.
Pakistan held a general election on July 25, with Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) party winning a majority of seats in the National Assembly.
The PTI is expected to approach the IMF for a bailout package soon after the formation of a new government.
Mohammed Sohail, CEO of the brokerage house Topline Securities, told Arab News: “Dealing with the IMF will be a tough task for the new government.”
He added: “Tough economic measures, coupled with political matters, will come into discussion before the IMF approves the much-needed funding.”
Beijing has pledged $57 billion to Pakistan as part of the China-Pakistan Economic Corridor (CPEC).
This has led to massive imports of Chinese equipment and materials, which is one of the reasons for Pakistan’s high current account deficit.
Islamabad and Beijing “need to work closely to eliminate bilateral trade imbalances by increasing Pakistan’s exports to China,” said Shah.
Pakistan’s Finance Ministry said Islamabad “will continue to ensure that all CPEC projects are completed according to the agreed terms and within the stipulated timelines. Third parties cannot weaken our collective resolve to make CPEC a success story.”
