United States' Secretary of State Mike Pompeo has warned that the US would closely be watching whether the International Monetary Fund (IMF) bails out Pakistan — a key player in China's One Belt One Road (OBOR) project, and right now in need of a bailout.

"Make no mistake, we will be watching what the IMF does," Pompeo stated in an interview to CNBC after saying that he would welcome mutually beneficial engagement between the US and Pakistan.

"There's no rationale for IMF tax dollars — and associated with that, American dollars that are part of the IMF funding — to bail out Chinese bondholders or China itself," he added, signifying that Pakistan's new government, which is severely in need of a bailout, might run into further financial troubles after taking oath.

Read: Why Pakistan is back in trouble with balance of payment

All indicators suggest the Pakistan Tehrek-e-Insaf's government — which is likely to take oath next month — will immediately have to approach the IMF for what would be the country's 13th bailout from the fund.

“Exports are down, debt is up, the macro indicators are pretty poor,” says Sehar Tariq with the US Institute of Peace.

According to the Financial Times, senior Pakistani finance officials are drawing up options for Khan to seek an IMF bailout of up to $12 billion. In a Reuters report on Tuesday, however, an IMF spokesperson said : “We have so far not received a request for a fund arrangement from Pakistan and we have not had discussions with the authorities about any possible intentions.”

Op-ed: Next finance minister will face a tough job

The other option may be further borrowing from China.

Through OBOR's flagship project China Pakistan Economic Corridor (CPEC), Pakistan has taken numerous loans from its trading partner China, which economists have warned the country will face difficulty in paying back.

According to a report in Dawn on Monday, China has agreed to pour in some extra foreign exchange on top of the CPEC funding and the rupee rise since the July 25 polls is being linked to this. The size of official inflows is $2 billion. Of this, $1bn has already come into our accounts, top bankers said while confirming media reports.

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Kindness needed
Updated 20 Jun, 2024

Kindness needed

This year’s World Refugee Day theme — solidarity with refugees — includes keeping our borders accessible and addressing the hurdles they face.
Fitch’s budget note
20 Jun, 2024

Fitch’s budget note

PAKISTAN’S ongoing economic crisis is multifaceted. At one end, the government must pursue stabilisation policies...
Cruelty to animals
20 Jun, 2024

Cruelty to animals

TWO recent incidents illustrate the immense cruelty many in this country subject voiceless animals to. In the first...
Price bombs
Updated 18 Jun, 2024

Price bombs

It just wants to take the easy route and enjoy the ride for however long it is in power.
Palestine’s plight
Updated 17 Jun, 2024

Palestine’s plight

While the faithful across the world are celebrating with their families, thousands of Palestinian children have either been orphaned, or themselves been killed by the Israeli aggressors.
Profiting off denied visas
Updated 19 Jun, 2024

Profiting off denied visas

The staggering rejection rates underscore systemic biases in the largely non-transparent visa approval process.