Three US lawmakers have expressed “deep concern” over IMF bailout package to Pakistan. The lawmakers suspect that the bailout package lent by IMF would be used by Pakistan to repay the huge Chinese debt it has accumulated over the years. Ted Yoho, Ami Bera and George Holding wrote a letter to Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo that Pakistan will use the IMF loan money to repay China Pakistan Economic Corridor (CPEC) debt.
“We write to express our deep concern over attempts made by the Government of Pakistan to seek a bailout deal with the International Monetary Fund to retrieve debts incurred from predatory Chinese infrastructure projects,” said the US Congressmen in the letter. Pakistan has borrowed huge sum of money to finance the $62 billion CPEC infrastructure project. “Its debt repayment and profit repatriation terms are not transparent and have understandably raised concerns inside Pakistan,” said the lawmakers.
The lawmakers were also apprehensive that the IMF bailout will bring any structural change in Pakistan’s economy. The country has taken 22 IMF bailout packages for the last 30 years but the public finance is still in doldrums. “Another bailout that fails to provide transparency and address issues of balance of payment, high fiscal deficit, and unsustainable debt will again be doomed to fail, instead enriching China,” warned the Congressmen.
The lawmakers quoted the example of Sri Lanka where China controls Hambantota port through a 99 year lease because the country has not been able to repay the project debt. “The impact of Chinese predatory financing in Pakistan, as already seen in the case of the Hambantota port in Sri Lanka, cannot be ruled out,” wrote the Congressmen.
Earlier Mike Pompeo also advised the IMF to refrain from lending loans to this South Asian country. “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,” Pompeo said.
The messed up public finances of the country will be a huge problem for newly elected Imran Khan who promised ‘Naya Pakistan’ to his electorate. A few months back China bailed out the country by giving one billion dollars to pay for its imports. Large capital flight has taken place from Pakistan due to political instability in the country since last one year. This dried up country’s foreign exchange, making it difficult for them to finance its imports which are increasing due to projects like China-Pakistan Economic Corridor (CPEC) and the burgeoning demand from urban middle class. There is no certainty in the policies of this country because the governance keeps changing hands between the Army and pseudo-democratic regimes. Foreign investors pulled out almost 857 billion Pakistani rupees ($7 billion) from the Pakistani stock exchange because they could not see any stability in the country. There is a serious balance of payments problem in the country as the imports are at an all-time high, while exports and foreign investments are very low.
The Trump administration has been highly critical of Pakistan and its closeness with China. US also stopped the billions of dollars of security help to the terror funding country. Given the influence US carries over IMF, Pakistan will face huge problems in getting another IMF bailout.