IMF warns Pakistan against ‘excessive loans’ from China

Published October 10, 2018
Nusa Dua: International Monetary Fund’s Economic Counsellor Maurice Obstfeld (C) is answering questions during the World Economic Outlook press conference on Tuesday.—AFP
Nusa Dua: International Monetary Fund’s Economic Counsellor Maurice Obstfeld (C) is answering questions during the World Economic Outlook press conference on Tuesday.—AFP

NUSA DUA: Pakistan has not yet formally approached the International Monetary Fund for financial assistance, but if bailout talks get underway this week, the goal will be to help Pakistan reach its full potential, the IMF’s chief economist said on Tuesday.

Addressing a news conference at the IMF and World Bank annual meetings in Bali, the IMF’s Maurice Obstfeld cautioned that increased Chinese involvement in Pakistan’s economy could bring both benefits and risks.

Obstfeld said Pakistan is facing financing gaps as it has been hit by a large fiscal and current account deficit, a low level of reserves and a currency he described as “too rigid” and over-valued.

Finance Minister Asad Umar said on Monday the government would seek to open talks with the IMF in Bali this week for emergency financial assistance.

Prime Minister Imran Khan had earlier sought alternatives to a second bailout programme in five years from the IMF as it impose austerity and limit his vision of an Islamic welfare state.

Obstfeld said that if the IMF does enter into talks with Pakistan this week on a possible new financing programme, the goal would be reforms that would help Pakistan reach its “immense potential” without providing specific details.

“The government has expressed its desires to enact deep structural reforms that might break the cycle of Pakistan needing financial support from the Fund,” he said.

Infrastructure needs

Pakistan needs more infrastructure development, Obstfeld added, and the country could benefit from China’s role in supporting its project financing.

But China’s involvement could also bring potential risks, he said.

“It is important that the design of the projects... be solid and excessive debts which cannot be repaid are avoided,” the IMF chief economist said.

Islamabad has cut the size of the biggest Chinese “Silk Road” project in Pakistan, a reconstruction of the main rail line between the port city of Karachi and Peshawar in the northwest by $2 billion, citing government concerns about the country’s debt levels.

The changes are part of Islamabad’s efforts to rethink key Belt and Road Initiative projects in Pakistan, to which China has pledged about $60bn in financing.

The Trump administration has been critical of China’s Belt and Road initiative, saying that it has saddled some developing countries with debts they cannot afford to repay.

In July, US Secretary of State Mike Pompeo said there was “no rationale” for an IMF bailout of Pakistan that pays off Chinese loans to Pakistan.

Chinese officials have rejected criticism that the so-called China-Pakistan Economic Corridor projects have burdened Pakistan with unsustainable debts. Instead, the Chinese maintain, they have boosted the country’s economic growth and provided 70,000 jobs.

Published in Dawn, October 10th, 2018

Opinion

Viral violence
Updated 25 Feb 2021

Viral violence

How many more brutal videos must be uploaded for us to put an end to torture?
The political chessboard
Updated 24 Feb 2021

The political chessboard

It is now hard for the PTI to defend itself from the opposition’s onslaught.

Editorial

IHK & human rights
Updated 25 Feb 2021

IHK & human rights

If India continues to be pampered and the Kashmiris’ plight ignored, peace in South Asia will remain a distant dream.
25 Feb 2021

A better law

THAT the Sindh Police has taken an initiative to bring improvements to the criminal justice system is a positive...
25 Feb 2021

Power breakdown report

A NEPRA inquiry into last month’s power breakdown that left almost the entire country without electricity for up ...
Return of militancy
Updated 24 Feb 2021

Return of militancy

Extremism is a hydra-headed monster that needs a sustained, multifaceted approach to vanquish.
24 Feb 2021

FDI decrease

THE more permanent and non-debt-creating FDI inflows to Pakistan have shrunk by a whopping 27pc to a meagre $1.1bn ...
24 Feb 2021

Myanmar protests

THE protests against Myanmar’s Feb 1 military coup have refused to die down, with hundreds of thousands of people...