WASHINGTON: The US is making all efforts to ensure that any IMF bailout to Pakistan is not used to repay its Chinese debts, a senior Trump administration official has told lawmakers.
Cash-strapped Pakistan is seeking USD 8 billion from the International Monetary Fund (IMF) to bail itself out from a severe balance-of-payments crisis that threatens to cripple the country's economy.
A recent meeting between the IMF and Pakistan ended in a stalemate.
The US feels that the huge Chinese debt was responsible for the economic challenges in Pakistan.
"We are working and making clear within the IMF that if it were going to supply any funding to Pakistan that it would not be used to repay Chinese loans," David Malpass, Under Secretary of Treasury for International Affairs, told lawmakers during a Congressional hearing on Wednesday.
There are concerns among American lawmakers that the IMF money could be used to repay Chinese debt.
Malpass said that the US is also trying to make sure that Pakistan changes its economic programme so that it's not a failure in the future.
During the House Financial Services Committee hearing on 'Evaluating the Effectiveness of the International Financial Institutions' Congressman Ed Royce said Pakistan is currently seeking a multibillion-dollar IMF bailout.
"In July, Secretary (of State, Mike) Pompeo said there's no rationale for IMF tax dollars and those associated with American dollars that are part of IMF funding for those to go to bail out Chinese bondholders or China itself," he said.
"We will make strong efforts, and I believe successful efforts, to make sure that what you describe doesn't happen, meaning a payoff of Beijing via Islamabad," Malpass said.
Malpass said that IMF loans tend to be shorter maturity loans and China's loans to Pakistan have been longer-maturity loans.
"So from the standpoint of that money being used, we will look for was that that roundtripping does not happen the way you described," he said.
"But important in this, is the structural reforms in Pakistan that are necessary for it to stop being such a poor country," Malpass said.
China is making huge infrastructure investments as part of its Belt and Road Initiative (BRI).
The BRI's flagship project is the USD 60 billion ChinaPakistan Economic Corridor (CPEC) that is planned to run from northwest China's Xinjiang province to Gwadar port in Pakistan's Balochistan province.
There are concerns that given Pakistan's growing Chinese debt, the same could happen to the Gwadar port and other major CPEC-linked projects in Pakistan.
But China has rejected criticism that the CPEC projects have saddled Pakistan with expensive debt.
"The CPEC has not inflicted a debt burden on Pakistan, rather when these projects get completed and enter into operation, they will unleash huge economic benefits and these will create considerable returns to the Pakistani economy," China's State Councillor and Foreign Minister Wang Yi said Islamabad in September.