ZCZC
BCN-21
PAKISTAN-IMF-US-CHINA-POLITICS
Pakistan hits back at ‘inappropriate’ US fears over IMF bailout
ISLAMABAD, Aug 2, 2018 (BSS/AFP) – Pakistan hit back Wednesday at US fears
that any IMF bailout its new government might have to seek would be used to
repay Chinese loans, stating that it was “totally wrong” to link the two.
Abdullah Hussain Haroon, the caretaker foreign minister, said that a new
government led by Imran Khan, who won the country’s general election last
week, would have to decide whether to approach the International Monetary
Fund (IMF) amid fears of a balance of payments crisis.
However he also dismissed as “inappropriate” comments by US Secretary of
State Mike Pompeo earlier this week voicing concerns over any IMF bailout
being used to repay Chinese loans to Islamabad.
Analysts have predicted that Pakistan, which is running down its foreign
reserves and devaluing its currency in a bid to bridge a yawning trade
deficit, will need to seek help urgently — either from a friendly country,
or by going to the IMF for its second bailout in five years.
The new government will have “limited time” to act, Fitch ratings agency
said this month.
But on Monday Pompeo voiced concerns about any IMF bailout for Islamabad,
telling US television station CNBC: “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 — or China
itself.”
The US is one of the Washington-based IMF’s largest donors.
The concerns centre on Beijing’s ambitious $62 billion dollar
infrastructure project — the China-Pakistan Economic Corridor (CPEC) —
linking its western province of Xinjiang to the Arabian Sea via Pakistan.
The terms of the massive CPEC deals are shrouded in secrecy, raising
concerns about Pakistan’s ability to repay Beijing’s investment.
Haroon said the new government would have to decide on whether to approach
the IMF. Asad Umar, widely tipped to become Khan’s finance minister in a
coalition government, tweeted on Tuesday that “no option including IMF is
ruled out”.
But Haroon also hit back at Pompeo’s comments, saying: “It is totally
wrong to link an IMF package with CPEC”, and that there was “absolutely no
reason for anyone to intervene” in Pakistan’s relationship with China.
The finance ministry did not answer requests for comment by AFP.
Pakistan, which has historically relied on imports, has increased its
procurement of materials to help build CPEC projects while also suffering
from higher oil prices.
Its meagre exports such as textiles, meanwhile, have been hit as cheaper
Chinese-produced goods flood the markets. Foreign remittances have not been
enough to plug the gap.
Earlier this month China defended itself against suggestions CPEC was
exacerbating Pakistan’s financial predicament, calling the idea “highly
irresponsible” and insisting that its loans account for just 10 percent of
Islamabad’s debt, which sits at roughly 70 percent of GDP.
“Even if there is a so-called ‘debt trap’, the initiator is not China,”
its embassy said in a statement.
BSS/AFP/HR/1025