US warns against IMF bailout for Pakistan that helps China
WASHINGTON: US Secretary of State Michael R. Pompeo has warned the International Monetary Fund (IMF) that the Trump administration will not allow it to lend US dollars to Pakistan for repaying China.
In an interview to CNBC television, broadcast on Monday evening, Secretary Pompeo also expressed the desire to engage with the new Pakistani leadership in a mutually beneficial relationship.
The Financial Times reported earlier this week that Pakistan may seek an IMF bailout package of up to $12 billion to strengthen its fragile economy.
Secretary of state Pompeo expresses desire to engage with new Pakistani leadership in mutually beneficial relationship
Interviewer Michelle Caruso-Cabrera, however, depicted Pakistan’s possible request as borrowing money from the IMF to repay China, reminding Secretary Pompeo that IMF loans also include US taxpayer dollars.
“There’s a chance that US taxpayer dollars are going to go towards Chinese-directed companies as part of that bailout. Are you concerned about that? Are you monitoring that?” she asked.
“So, two thoughts. First, there’s new leadership in Pakistan, and we welcome engagement with them in a way that we think will benefit each of our two countries,” Secretary Pompeo replied.
“Second, make no mistake: we will 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,” he said.
The media interpreted this as a message to Pakistan, indicating that Washington will oppose its request for a bailout package from the IMF.
The question about Pakistan, however, was sandwiched between a barrage of questions on US-China tensions and Washington’s response to Beijing’s “One Belt, One Road” initiative, which includes the $62 billion CPEC package for rebuilding Pakistan’s decaying infrastructure and reviving its economy.
Asked for comments on Secretary Pompeo’s statement, Pakistani officials told journalists in Islamabad that they saw it as an effort to “use the country’s impending economic crisis to drive a wedge between Islamabad and Beijing”.
One senior Pakistani government adviser told the Financial Times: “The US is trying to spoil China’s biggest contribution to our future.”
Another added: “The Americans are trying very hard to put pressure on Pakistan because they have their own interests. But making it so hard for Pakistan to successfully negotiate a new programme with the IMF makes no sense. Ultimately, Pakistan will search for other options if the road to the IMF is blocked.”
The reported $12bn package would be Pakistan’s largest bailout from the IMF.
The FT report from Islamabad said that senior Pakistani officials would present the option to Imran Khan soon after he takes office.
The proposed package — double the $5.3bn the fund lent to the country in 2013 — would be Pakistan’s 13th IMF bailout.
An IMF spokesperson told journalists in Washington on Tuesday that so far, the fund had not received a request from Pakistan and there have been no internal discussion on the proposed package in the IMF.
Published in Dawn, August 1st, 2018