US warns against IMF bailout for Pakistan that aids China

[hadi123]

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.

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 — however, this has yet to be confirmed.

In a Reuters report on Tuesday, an IMF spokesperson is quoted as saying: “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.”

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.

https://www.dawn.com/news/1424045/us-warns-imf-against-bailout-for-pakistan

 

[Syed1]

US needs to shut up and mind their own business

 

[Abdullah719]

Weak economy forcing Pakistan to seek loan from IMF: report

WASHINGTON: A weakening economy is forcing Pakistan to seek another loan from the International Monetary Fund (IMF) and may also affect its ability to buy defence equipment, says a report released this week.

The report by Avascent, a consulting firm which advises international defence contractors, revi*ews the impact of this economic slowdown on Pakistan’s defence purchases, but it also includes a brief review of the nat*ional economy.

“Pakistan’s current account deficit stands at $14 billion, over 5 per cent of the GDP, while its foreign exchange reserves have dwindled to $9.6 billion, enough to cover only two months of imports,” says the report.

“In a move seen as paving the way for an IMF loan after national elections on July 25, the country’s central bank has devalued the rupee three times since December 2017. A weaker currency makes imports more expensive, further constraining Islamabad’s ability to buy defence equipment and spare parts in US dollars.”

The report claims that negative trends in its relationship with the United States, a depreciating rupee, and its untenable foreign exchange position, is forcing Pakistan to reach out to other countries for support, particularly China.

The report points out that Pakistan has received over $5 billion in bilateral and commercial loans from China this fiscal year, including a $1billion loan in early July. In addition to the China-Pakistan Economic Corridor (CPEC) — a package of infrastructure projects worth an estimated $62 billion — Pakistan has also turned to Beijing as a source of defence imports.

“Over the next decade, Beijing will become the single most important arms supplier for the Pakistani military,” the report adds.

https://www.dawn.com/news/1423780/weak-economy-forcing-pakistan-to-seek-loan-from-imf-report

 

[Gabbar Singh]

US needs to shut up and mind their own business

To be fair America and it's taxpayers are the highest contributors to the IMF (over 3 x more than any other nation) - they do have a say in this.

 

[cricketjoshila]

US needs to shut up and mind their own business

US is the largest shareholder in IMF.So actually it is their business.

 

[shortbread]

Pakistan hits back at US resistance to IMF bailout

Pakistani officials have criticised what they say are attempts by the US to use the country’s impending economic crisis to drive a wedge between Islamabad and Beijing.

Officials in Islamabad have accused Washington of trying to strong-arm Pakistan into scaling back billions of dollars’ worth of Chinese investment in their country’s infrastructure as part of a potential bailout by the IMF.

The Financial Times revealed this week that Pakistani officials had drawn up plans to ask the IMF for a $12bn bailout soon after Imran Khan comes to power as the country’s new prime minister. Pakistan is suffering an acute shortage of foreign reserves after years of high imports and low exports have taken their toll.

But even before Pakistan even makes a request, there are signs of resistance from the US, which is the IMF’s biggest shareholder.

Mike Pompeo, US secretary of state, on Monday warned the IMF not to grant a bailout to Pakistan that would compensate Chinese investors in Pakistani projects.

Mr Pompeo told CNBC: “We will be watching what the IMF does. There is no rationale for IMF tax dollars, and associated with that American dollars that are part of the IMF funding, for those to go to bail out Chinese bondholders or China itself.”

His remarks were echoed in a blog post published by Mark Sobel, a former US representative to the IMF. Mr Sobel said: “The fund needs to have at its fingertips comprehensive data on all China-Pakistan Economic Corridor lending [a showpiece Chinese infrastructure programme] — its terms, maturities, and parties involved. Chinese lending should be on realistic terms and consistent with Pakistan’s sustainability.”

He added: “Otherwise, China should reschedule or write down its loans, sharply reducing the value of its claims.”

Beijing is planning to invest about $60bn in its southern neighbour as part of a wider plan by President Xi Jinping to establish a new silk road of global trading routes. It has so far refused to publish any details of the terms of those loans however.

While Islamabad says the project will revolutionise Pakistan’s infrastructure, there are signs it is creating short-term economic problems, with loan repayments further depleting its foreign currency reserves.

Earlier this month, the Wall Street Journal revealed Pakistan had fallen behind on some of its payments, including plans to build new power plants.

Beijing has not yet commented on the potential terms of an IMF bailout for Pakistan. But any demands by the US for China to publish the terms of its CPEC loans, as well as to scale back its investments and even write some down, could set up a bruising clash between Beijing and Washington.

For now, China is continuing to keep Pakistan afloat with short-term lending. According to local reports, Beijing has agreed to lend Islamabad a further $2bn since last week’s election, adding to the $5bn Pakistan borrowed from Chinese commercial banks in the previous financial year.

https://www.ft.com/content/ff3a6130-94ba-11e8-b67b-b8205561c3fe

US has veto power in the IMF unlike China, so if this is a clash China might flex it's muscles to Pakistan's advantage. New more lenient terms for the loans could be negotiated or China could also write down large chunks of it in order to display it's financial prowess. This would also send positive signals to other countries involved in the Chinese Belt road initiative.

The big issue for Pakistan is the terms for these loans and how to repay them.

Pakistan will end up paying $90 billion to China over a span of 30 years against the loan and investment portfolio worth $50 billion under the China-Pakistan Economic Corridor (CPEC), report of a brokerage house estimated.

The estimated return – sum of principal and interest on foreign currency debt and repayment of profits/dividend on equity investment – shows 40% return on investment.

The amount increased to $54 billion after the inclusion of more projects in CPEC such as investments in Pakistan Railways and financing of the Karachi Circular Railways project. The volume of return would increase accordingly. Infrastructure and power projects – part of the CPEC portfolio and divided across time in terms of priority – are expected to be completed by fiscal year 2030.

“Average annual repayment of CPEC will be $3 billion. {However, in medium term} between fiscal year 2020-25, it will range between $2.0-5.3 billion with average payment of $3.7 billion,” Saad Hashemy, an analyst at the brokerage house, said in a report titled, ‘Pakistan’s External Account Concerns and CPEC Repayment’.

Another valid concern is over the repayment of CPEC-related projects. This is because most projects are being funded abroad and Pakistan is not seeing any significant inflow of foreign exchange.

“It should be noted that project financing for CPEC is being done between Chinese companies and banks and around 25% of CPEC investment is expected to come in Pakistan,” he said. The report argued the repayment would remain manageable despite additional burden of debt servicing and repatriate of profits on equity investment in CPEC. The amount for additional repayment would be generated from the expected surge in exports, drop in imports and increased inflow of remittances.

https://tribune.com.pk/story/1352995/pakistan-will-paying-china-90b-cpec-related-projects/


If these are really the terms of borrowing then China needs to wake up and realise it simply wont work. They were somehow able to convince a weak government to sign the dotted line, but the big question is 'will they get their money?'.

Instead they must prioritise the project's success and offer IK's government far more friendlier and manageable terms. The IMF loan is simply piling on more debt, instead this could be an opportunity for IK's government to revisit the offer and guarantee better terms for Pakistan.

 

[the Great Khan]

Pakistan hits back at US resistance to IMF bailout


https://www.ft.com/content/ff3a6130-94ba-11e8-b67b-b8205561c3fe

US has veto power in the IMF unlike China, so if this is a clash China might flex it's muscles to Pakistan's advantage. New more lenient terms for the loans could be negotiated or China could also write down large chunks of it in order to display it's financial prowess. This would also send positive signals to other countries involved in the Chinese Belt road initiative.

The big issue for Pakistan is the terms for these loans and how to repay them.


https://tribune.com.pk/story/1352995/pakistan-will-paying-china-90b-cpec-related-projects/


If these are really the terms of borrowing then China needs to wake up and realise it simply wont work. They were somehow able to convince a weak government to sign the dotted line, but the big question is 'will they get their money?'.

Instead they must prioritise the project's success and offer IK's government far more friendlier and manageable terms. The IMF loan is simply piling on more debt, instead this could be an opportunity for IK's government to revisit the offer and guarantee better terms for Pakistan.

Follow the chinese ambassadors tweets. He has talked about the loans to pakistan. I dont think we are going to the IMF this time. Its quite clear that the only way they will give us money is if we scale back CPEC. That is not going to happen. Ever. China is all in when it comes to CPEC and will not let this go down the tubes. Lets hope Asad Umar has a plan to sort out our foreign reserves otherwise all bets are off..

The Us's final leverage has always been ishaq dar and the IMF. if Pakistan can get away from this we will be in a better position!!

 

[shortbread]

Follow the chinese ambassadors tweets. He has talked about the loans to pakistan. I dont think we are going to the IMF this time. Its quite clear that the only way they will give us money is if we scale back CPEC. That is not going to happen. Ever. China is all in when it comes to CPEC and will not let this go down the tubes. Lets hope Asad Umar has a plan to sort out our foreign reserves otherwise all bets are off..

The Us's final leverage has always been ishaq dar and the IMF. if Pakistan can get away from this we will be in a better position!!

I have a feeling the new Govt. will bargain for better terms. All the western powers want the Chinese initiative to fail and China cannot let that happen. A 2-3 year payment holiday plus reduced interest rates will go a long way in ensuring completion and success of the project. IK needs to play the smart diplomat here rather than the clueless desperate negotiators of Nawaz's regime.

Also it's unfair for China to expect Pakistan to carry further debt when majority of resources used for the project are Chinese exports and half the labour theirs as well. If this has to be a win-win for everyone then China needs to ensure it does everything to ensure the project is viable for Pakistan's economy.

 

[TheLastGreatMan]

I have a feeling the new Govt. will bargain for better terms. All the western powers want the Chinese initiative to fail and China cannot let that happen. A 2-3 year payment holiday plus reduced interest rates will go a long way in ensuring completion and success of the project. IK needs to play the smart diplomat here rather than the clueless desperate negotiators of Nawaz's regime.

Also it's unfair for China to expect Pakistan to carry further debt when majority of resources used for the project are Chinese exports and half the labour theirs as well. If this has to be a win-win for everyone then China needs to ensure it does everything to ensure the project is viable for Pakistan's economy.

There is no way Pakistan can bargain with China.

 

[IMMY69]

US is the largest shareholder in IMF.So actually it is their business.

That is correct and the US is busy bailing out its own farmers to the tune of 12 billion dollars..
all created due to the Trump levies...

 

[the Great Khan]

There is no way Pakistan can bargain with China.

lol..we will see..its not a bazaar where you haggle like old women. We are both mutually connected for our interests and therefore Pakistan has some leverage and we have a good relationship with China.

we know your hoping this all fails so you can come on here and gloat as is your nature but dont hold your breath..

 

[TheLastGreatMan]

lol..we will see..its not a bazaar where you haggle like old women. We are both mutually connected for our interests and therefore Pakistan has some leverage and we have a good relationship with China.

we know your hoping this all fails so you can come on here and gloat as is your nature but dont hold your breath..

Why should I hope it all fails?

You can have all sort of relationship but end of day China has to make money from this venture,it’s not charity.

 

[enkidu_]

Pakistan’s economy has hit severe turbulence over the past year and most analysts expect the nuclear-armed nation to seek a bailout, either from the IMF or closest ally China, to avoid a currency crisis.

Beijing has pledged $57 billion in loans for Pakistan as part of China’s vast Belt and Road initiative, deepening economic and diplomatic ties between the neighbors at a time when relations between Islamabad and Washington are fraying over how to deal with Islamist militants waging war in Afghanistan.

U.S. Secretary of State Mike Pompeo on Monday warned that any potential IMF bailout for Pakistan’s incoming government should not provide funds to pay off Chinese lenders.

In response, Pakistan’s finance ministry sought to de-couple the link between any potential IMF bailout and Beijing’s loans for the China-Pakistan Economic Corridor (CPEC), which spans mostly energy and transport infrastructure.

“First and foremost it is totally wrong to link the IMF package with CPEC. It is affirmed that Pakistan Government is fully committed to undertake and complete CPEC projects in their totality,” the finance ministry said in a statement.

“Third parties cannot weaken our collective resolve to make CPEC a success story.”

CPEC is billed as Pakistan’s most important national project, while Beijing has touted CPEC as the “flagship” project in the vast Belt and Road initiative to build rail, road and maritime links across the globe.

Both countries are very sensitive of any criticism about CPEC.

The United States has been concerned that China is saddling smaller countries with debt as a way to gain influence and control around the globe.
(...)
Miftah Ismail, Pakistan’s finance minister in the previous government until late May, said the Chinese debt repayments were nowhere near as big as Western nations imagine.

He told Reuters that ministry of finance calculations showed that for the next five years, Pakistan’s total annual debt repayments and profit expatriation by Chinese companies would be below $1 billion.

“All of those things combined will not go to $1 billion up until 2023,” he said.

Ismail added loans given by China to Pakistan had a 30-year length and a five-year grace period, meaning there were no repayments for the first five years.

The lending was a combination of zero-interest debt, concessionary and some market rate loans, Ismail said, adding that the “weighted average” interest rate for these loans was 2 percent

“These are not loans that will break our back,” he said.

Ismail said the problems hitting Pakistan’s economy were not linked to debt but rather to current account problems, which was not China’s fault.

Pakistan’s finance ministry said it was engaged in “technical discussions” with the IMF but the interim caretaker government did not have a mandate to decide on any IMF package, which will be down to the new administration.

https://www.reuters.com/article/us-...rns-about-imf-bailout-and-china-idUSKBN1KM4BR

 

[Manager101]

IMF is a mega trap set by super financial powers to keep the developing countries remain poor forever. There is not even a single example where poor countries have benefited from it in long-term.

In short, it's a usury based business, where poor countries are their permanent customers.

Alas !! The current economic system of the entire world benefits only the elites and wealthy class.

 

[TheLastGreatMan]

IMF is a mega trap set by super financial powers to keep the developing countries remain poor forever. There is not even a single example where poor countries have benefitted from it in long-term.

In short, it's a usury based business, where poor countries are their permanent customers.

Alas !! The current economic system of the entire world benefits only the elites and wealthy class.

But developing countries from sub continent/Africa etc doesn't have much option.Who will give money in reasonable terms otherwise?

 

[Manager101]

But developing countries from sub continent/Africa etc doesn't have much option.Who will give money in reasonable terms otherwise?

The issue is that, since the introduction of paper money as a medium of exchange, the financial powers can easily manipulate the economic system/ market based on the needs of 0.01% Elite class, hence, until and unless some drastic changes are made in the World economy and trade, then poverty will keep on rising.

When Gold coins and silver coins were medium of exchange, the curse of Inflation was extremely low. Although I don't think, current super powers will allow it since it will effect their modern imperialist dominance.

 

[chacha kashmiri]

You’ve been tangoed strikes again

Hopefully Imran ‘s oxford degree and Dr Yasmin’s expertise as CM means Pakistan’s diplomacy in averting the NWO who can keep playing the commodore with their kids in front of hungry lions without worrying about the PTI taking over Uzbekistan and making foreign workers ungrateful to their current saviour states as they marvel at the Renaissance of Azerbaijan

 

[Angrez Pakistani]

I would have been more optimistic if I was more aware of the next government’s money recovering plan. I just feel like we are trapped in a cliched discussion of economy without anyone having an inkling of what it actually is.

 

[bond]

USA has been waiting for a while now for Pakistan to arrive at this choke point.

Expect a fierce opposition from USA ending with a leniency in return for the head of #2 of Al Qaeda/taliban/haqqani whatever other creatures on Pakistan soil + some other concessions in Afghanistan. Both sides have their cards but USA has more leverage.

Dont expect much from China.

 

[InziRules]

The issue is that, since the introduction of paper money as a medium of exchange, the financial powers can easily manipulate the economic system/ market based on the needs of 0.01% Elite class, hence, until and unless some drastic changes are made in the World economy and trade, then poverty will keep on rising.

When Gold coins and silver coins were medium of exchange, the curse of Inflation was extremely low. Although I don't think, current super powers will allow it since it will effect their modern imperialist dominance.

We have to deal with the world and the economy as it is, not with how the world economy should be.

 

[Mian]

“One friendly advice to the Americans, we’ll worry about our Chinese debt, but I think they better handle their own Chinese debt first,” he said. “We have a serious external debt problem, I’m not saying we don’t,” though “we don’t have a Chinese debt problem.”

- Asad Umar Pakistan's upcoming Finance Minister

https://www.bloomberg.com/news/arti...-on-more-than-12-billion-bailout-in-six-weeks

 

[Asim_khan]

“One friendly advice to the Americans, we’ll worry about our Chinese debt, but I think they better handle their own Chinese debt first,” he said. “We have a serious external debt problem, I’m not saying we don’t,” though “we don’t have a Chinese debt problem.”

- Asad Umar Pakistan's upcoming Finance Minister

https://www.bloomberg.com/news/arti...-on-more-than-12-billion-bailout-in-six-weeks

Shots fired! Love the fact way Asad Umar is holding up the mirror to the Americans. If anyone can get us out of this quagmire, I think it's him. As important if not more so than Imran Khan for Naya Pakistan to be successful

 

[Lonewarrior]

USA has been waiting for a while now for Pakistan to arrive at this choke point.

Expect a fierce opposition from USA ending with a leniency in return for the head of #2 of Al Qaeda/taliban/haqqani whatever other creatures on Pakistan soil + some other concessions in Afghanistan. Both sides have their cards but USA has more leverage.

Dont expect much from China.

LOL

http://www.pakpassion.net/ppforum/showthread.php?274957-US-Congress-Massively-Cuts-Pak-s-Defence-Aid-What-It-Loses-In-Return

 

[cricketjoshila]

“One friendly advice to the Americans, we’ll worry about our Chinese debt, but I think they better handle their own Chinese debt first,” he said. “We have a serious external debt problem, I’m not saying we don’t,” though “we don’t have a Chinese debt problem.”

- Asad Umar Pakistan's upcoming Finance Minister

https://www.bloomberg.com/news/arti...-on-more-than-12-billion-bailout-in-six-weeks

This statement may well look good for the galleries but thats about it. Pakistan's sovereign debt ratings are junk status while US's is among the most elite investement status. So comparing Pakistan's China debt to US's China debt is laughable.

Secondly US is not looking for a IMF bail out to avoid the balance of payment crisis,Pakistan is.Its second in last 5-6 years.So seriously this chest thumping doesnt suit him.

Thirdly US being the highest contributor to IMF and the biggest shareholder has every right to say things about any possible IMF bailout. Asad Umar may not like it,well then he must find another way to raise the money.

 

[Abdullah719]

The US should worry about its own Chinese debt: Asad Umar

PTI leader and likely candidate for the post of finance minister in the upcoming government Asad Umar has said that the US should worry about its own Chinese debt and let us worry about our own.

US Secretary of State Mike Pompeo had warned that any potential IMF bailout for Pakistan should not provide funds to pay off Chinese lenders.

“One piece of friendly advice to the Americans: we’ll worry about our Chinese debt, but I think they better handle their own Chinese debt first,” said Umar.

He acknowledged that Pakistan does have a serious external debt problem, however, “we don’t have a Chinese debt problem.”

Decision on $12b to be made in six weeks

Umar said that the country needs around $12 billion and the decision about where to get this needs to be made soon.

“The decision needs to be made in the next six weeks. The further you go forward the more difficult, the more expensive the options become,” Umar told Bloomberg in an interview on Thursday.

He hinted that in order to increase its foreign reserves Pakistan can even go to the International Monetary Fund besides approaching friendly countries and issuing diaspora bonds.

This is in total contrast with the promises that PTI had made during its election campaigns. The party had said that it would not take any more loans under any circumstances.

The PTI leader said they have yet to approach any potential lenders. “No formal work can be started until the government is formed,” he said.

https://www.samaa.tv/news/2018/08/us-should-worry-about-its-own-chinese-debt-says-asad-umar/

 

[Arham_PakFan]

LAHORE: After forming the federal government, the Pakistan Tehreek-e-Insaf (PTI) would have to take extraordinary bold steps to steer the country out of the current economic crunch, said PTI central leader Jahangir Khan Tareen.

Talking to Pakistan Furniture Council (PFC) Chief Executive Mian Kashif Ashfaq on Monday, Tareen said, “In one of the first steps, the newly elected government will go for a bailout package to improve foreign currency reserves.”

After addressing the issue, the government would switch to restoring competitiveness of the economy that needed 20 to 25 years to progress and required improvement in skills of the workforce and educating the people, he said.

PTI should improve tax policy to encourage the setting up of new industrial units in the country, he said and added existing board of directors of all autonomous and semi-autonomous bodies would be restructured by hiring world-class technocrats in an effort to produce satisfactory results.

PTI govt to allocate $2b for automation of services

Talking about promotion of the furniture sector, Tareen said, “Pakistan is blessed with abundant resources and our people are equipped with skills that can help develop the country on modern lines.”

He emphasised that skilled craftsmen could create unique pieces while large-scale factories could produce many identical units – in both cases adding to the employment.

“I am delighted to support the Pakistan Furniture Council, a body committed to promoting Pakistani skills and craftsmanship as well as creating international linkages to encourage trade,” he remarked.

The PTI leader said their government would appoint honest, hardworking and very well-experienced people in government, semi-government and autonomous departments to revive the country’s economy.

For PTI, walk on tightrope ahead, suggests Moody’s

It would revamp the Trade Development Authority of Pakistan (TDAP) to push the domestic industry, besides making it possible that all funds were utilised to promote Pakistan’s handmade world-class furniture in international markets.

The PFC chief, while congratulating Tareen for PTI’s victory in general elections, voiced optimism that the incoming government would utilise all available resources to promote the furniture sector of Pakistan. “This sector was badly neglected by previous governments,” he said.

“We need policies to protect the furniture sector so that we can grow in the right direction. We currently cannot compete with the Chinese market because of its prices, which is largely due to availability of skilled labour.”

Pakistan’s savings take a hit as low interest rates bite

China, for instance, has over 1,000 technical schools and enrolls at least 11 million people with support of the government to ensure they design such programmes that support the domestic industry.

https://tribune.com.pk/story/1774843/2-pti-will-seek-bailout-improve-forex-reserves-says-tareen/