Pakistan knocks IMF door for bailout, but the cost could be CPEC

The request comes at a time when Pakistan has barely two months of reserves before it goes bankrupt.

Pakistan PM Imran Khan (File | AP) 

NEW DELHI:  Pakistan’s new Prime Minister Imran Khan, who came to power on populist, anti-Western plank, had to swallow his pride and ask the International Monetary Fund (IMF) for a bailout package of over $9 billion dollars to help tide over the country’s acute financial crisis. Following a meeting between Pakistan Finance Minister Asad Umar with IMF managing director Christine Lagarde at the IMF summit in Bali, Indonesia, on Thursday, Lagarde issued a statement saying that “during the meeting, they requested financial assistance from the IMF to help address Pakistan’s economic challenges. An IMF team will visit Islamabad in the coming weeks to initiate discussions for a possible IMF-supported economic programme.”

The request comes at a time when Pakistan has barely two months of reserves before it goes bankrupt. An IMF team, which visited Pakistan earlier this month, had noted that while Pakistan had started taking some corrective action, these were grossly inadequate. 

Then there’s the anti-terror Financial Action Task Force, which after putting Pakistan on its gray last earlier this year, has warned that Pakistan has not complied with its promised reforms to escape being put on its blacklist in January. Blacklisting by the IATF would be catastrophic for Pakistan at a time when it is seeking bailouts from foreign institutions. 

But Khan’s woes have just begun, since one of the preconditions of any IMF loan would be a full disclosure of the amount Pakistan owes to China for the China-Pakistan Economic Corridor (CPEC), whose financial details remain opaque at best. Pakistan has taken $60 billion worth of loans from China, much of which is for the development of the CPEC. 

In June, US Secretary of State Mike Pompeo had cautioned against any IMF bailout to Pakistan that would be used to repay its existing debt to China. “Make no mistake. We will be watching what the IMF does,” Pompeo told CNBC television. An Indian official, while reiterating that the crisis was of Pakistan’s own making, quipped that “half their problems would be solved if they used their terrorist finances for better things.”

Dicey situation

• Pakistan has barely two months of reserves before it goes bankrupt
• A precondition for IMF loan would be a full disclosure of the amount Pakistan owes to China for the China-Pakistan Economic Corridor, whose financial details remain opaque at best