WASHINGTON – As Pakistan Tehreek-e-Insaf (PTI) is set to steer the economically weak country, the Trump administration has demanded to impose conditions on the possible major International Monetary Fund (IMF) bailout for Pakistan.
In an interview with CNBC, US Secretary of State Mike Pompeo on Monday, responding to question on reports that Pakistan is planning to reach out the IMF for $10-12 billion aid, said that the financial assistance should not be used for paying off Chinese lenders.
He said, “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”.
Pompeo said he is looking forward to working with the new government of Pakistan, which will be formed by Imran Khan as his party bagged the majority of the seat in National Assembly.
“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,” Pompeo said.
The Financial Times reported on July 29 that senior Pakistani finance officials have planned to advise Khan to seek an IMF bailout.
Meanwhile, the lending agency said that it has not received any formal aid request from Islamabad. An IMF spokesperson clarified that there was no discussion with Pakistani officials about the aid.
Recently a currency crisis engulfed Pakistan and it is one of the major challenges to be faced by the new government after assuming the power. A week before the July 25 elections, the US dollar reached the historic level of Rs131 due to depleting foreign exchange reserves.
Pakistan, which has taken around $5 billion in loans from China and its banks to finance major infrastructure projects, had sought another $1 billion in loans to arrest the declining foreign currency reserves.
Following the request, China has agreed to immediately give a $2 billion loan to Pakistan as “official bilateral inflow” to ease pressure on the next government.
According to reports in local media, over $1 billion has already been transferred to the SBP accounts this week, and would reflect in the reserves’ data to be released on August 2. The amount will push SBP-held foreign currency reserves past $10 billion.
Foreign experts are of the view that import of Chines equipment swelled to a massive level after the multi-billion dollar project, China-Pakistan Economic Corridor (CPEC), increasing the current account deficit of the country.