Pakistan PM Imran Khan has now officially, sought help from International Monetary Fund to bail out the country from the economy with a ballooning trade deficit, ailing currency and dwindling foreign reserves, claim reports.
Initial reports suggest that Pakistan government will demand loans of worth $12 billion from IMF. It may be Pakistan’s toughest loans, as it has taken a dozen IMF programs but has failed to put in effect the reforms required, in all but one bailout package.
“The conditions associated with a loan will include some harsh measures and the government will have to be very prepared to explain why Pakistan has been forced to return to the IMF,” said a senior official in Pakistan government to Financial Times.
IMF Managing Director has made it rather clear, that prerequisite for any loan to be granted to Pakistan, is that maintains transparency with regards to already taken loans from countries like China.
It suggests that Pakistan will have to disclose its all details regarding $62 billion investment from China, under One Belt One Road initiative.
Lagarde said an IMF team would visit the Pakistani capital of Islamabad in coming weeks to begin negotiating the terms.
The biggest threat it seems to loans are not from stringent norms of IMF, but from the USA, which has made it clear that it will not let IMF bailout countries stuck in debts by China.
US is the largest stakeholder in IMF and has greater say in loans sanctioned by it, although it does not have a veto. The USA has many-a-times accused China of indulging in ‘debt trap diplomacy’ with smaller countries like Pakistan.
US Secretary of State said it can’t let hard-earned money of IMF go to China, through countries like Pakistan.
All these come in the wake of fresh blow delivered to Pakistan after the Asia Pacific Group on Money Laundering (APGML) and Financial Action Task Force (FATF) asked Pakistan government to intensify actions against money laundering and terror financing. The country is already on the ‘grey list’ of FATF, if it further maintains inaction it can be further blacklisted, making it difficult for it to procure loans from IMF.
We had earlier reported that how Pakistan is easing its overwhelming debts, it had cancelled several projects of CPEC with China, worth $2 billion. It also has tried to cut its excess spendings in the country, but its far from being sufficient. It recently launched a populist housing scheme, in Pakistan is offering five million houses to people, which economists are terming as ‘austerity’.