The US might move soon to block the much needed IMF bailout for Pakistan. Reportedly 16 US Senators have requested Donald Trump to oppose IMF bailouts to all nations which have received loans from Beijing under China’s One Belt One Road initiative. This could badly impact Islamabad which is reeling under an economic crisis and foreign reserves continue to plunge. The letter written to Mike Pompeo by the US Senators mentions Pakistan, China and Djibouti.
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As reported by The News, the nations mentioned in the letters written to the US Secretary of State and Treasury Secretary mentions the nations which have received loans worth billions of dollars under infrastructure projects undertaken on their land by China under the OBOR initiative of Beijing.
The new government being formed in Pakistan has high hopes from the IMF to bail out the nation which stands on the brink of a major economic crisis. Pakistan has received massive loans worth $62 billion from China under the China Pakistan Economic Corridor and the US has expressed frequent concerns about the IMF bailout package being used to pay Chinese lenders.
The rising current account deficit makes an IMF bailout very important for Pakistan but the US Senators are keen to keep Pakistan deprived of any help from the International Monetary Fund. The letter written by the US Senators highlight the debt trap diplomacy of China and the national security threats posed by China’s Belt and Road Initiative in developing nations.
As per the Centre for Global Development, 68 countries are home to China’s BRI funding projects. 23 out of these 68 nations are vulnerable to being caught in debt distress while 8 countries could be staring at sovereign debt sustainability concerns in near future. The letter also underlined the fact that China has ignored standards and disciplines while acting as a lender to these nations including Pakistan.
Ae mentioned in the letter, China has lent $1.4 billion to Djibouti which makes up to 75 per cent of the GDP of Djibouti. The letter also mentioned that on 2016 the IMF agreed to provide a bailout package worth $1.5 billion to Sri Lanka because of unsustainable debts to China.
To help the economy of Pakistan which is presently amid a chaos will be the top challenges for Imran Khan when he takes the oath. These are testing times for Pakistan and the IMF bailout is the only hope of revival.
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