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BALI, Indonesia—International Monetary Fund Managing Director Christine Lagarde said a bailout deal with Pakistan would require “absolute transparency” of its debts, many of which come from China’s landmark Belt-and-Road initiative.
China started a $62 billion investment program in Pakistan three years ago to build roads, power plants, a port and other infrastructure. It is financed by Pakistani debt or obligations to buy electricity from the new Chinese power plants. The details of the deals haven’t been made public.
“In whatever work we do, we need to have a complete understanding and absolute transparency about the nature, size, terms of the debt that is bearing on a particular country,” Ms. Lagarde said Thursday at the IMF and World Bank Group annual meetings in Bali.
She added that the IMF needs to understand the extent of the position of all of Pakistan’s debt, including lending from sovereign governments and from state-owned enterprises, so that officials can determine its debt sustainability.
Why China and U.S. Are Vying for Dominance in Pakistan
In Pakistan, China and the U.S. are clashing over China’s One Belt, One Road initiative. To understand what’s at stake, it helps to take a look at why China is in Pakistan in the first place.
Her statements indicate Pakistan could be forced to disclose the full extent and terms of Chinese lending it has received in recent years, as part of Pakistan’s participation in China’s vast global infrastructure-spending program.
An official in Pakistan’s Ministry of Finance said that Pakistan is fully compliant with internationally accepted debt-reporting standards, adding that “there are no debt secrets.”
Pakistan’s new prime minister, Imran Khan, who took office in August, says Pakistan needed $10 billion to $12 billion for what he described as a short-term financial crunch that should pass in the next six months. He blames the previous government for taking on too much debt.
“We will think 10 times before taking on more debt,” Mr. Khan told his cabinet Thursday during a televised meeting in Islamabad. “We’ve been taking on loans to pay back previous loans.”
He has asked ministers for a report on what the debt taken over the past 10 years had been spent on and told them future loans must generate sufficient returns to repay them.
Beijing’s spending binge in Pakistan and elsewhere has emerged as a flashpoint in its tensions with Washington.
Washington has accused Beijing of “debt-trap diplomacy” by lending countries money to pay Chinese companies to build infrastructure that the recipients can’t afford.
U.S. officials and lawmakers have said they don’t want taxpayer money, funneled through the IMF, to end up funding a bailout of China. But it is unclear how IMF money can be ringfenced.
Christine Lagarde, head of the International Monetary Fund, pictured in meetings in Bali, Indonesia, on Oct. 11. PHOTO: SEONGJOON CHO/BLOOMBERG NEWS
Pakistan Finance Minister Asad Umar formally requested IMF assistance Thursday to deal with the country’s ballooning trade deficit and falling currency during a meeting with Ms. Lagarde in Bali.
The formal request kicks off a process that typically takes at least a month before a loan can be disbursed.
Ms. Lagarde said an IMF team would visit the Pakistani capital of Islamabad in coming weeks to begin negotiating the terms.
The IMF staff will establish the conditions Pakistan must meet to remain eligible. Then the bailout must be approved by the IMF’s executive board.
The U.S. has by far the largest voting stake on the IMF’s board, enabling it to exert influence on IMF loans when it chooses, but it doesn’t have a veto.
While Mr. Khan’s administration has been careful to say it supports the Chinese program, it also has quietly started a reassessment of it.
On Thursday, Mr. Khan singled out a $1.6 billion loan taken from China to build a metro rail service for the eastern city of Lahore. Mr. Khan said it “isn’t creating wealth but creating a deficit.”
Mr. Khan, who had vowed in the past to rid Pakistan of its dependence on Western financing, had been resisting an IMF program, with officials suggesting the country could make up its financial shortfall by getting funds from allied countries—Saudi Arabia, the United Arab Emirates and China—together with issuing bonds. But, with the markets spooked by this alternative plan, Pakistan announced Monday that it would seek a bailout from the IMF.
Pakistan says it is still talking to those three countries about a cash injection, but that hasn’t materialized so far.
https://www.wsj.com/articles/for-imf-help-pakistan-might-have-to-disclose-its-china-debts-1539234162
China started a $62 billion investment program in Pakistan three years ago to build roads, power plants, a port and other infrastructure. It is financed by Pakistani debt or obligations to buy electricity from the new Chinese power plants. The details of the deals haven’t been made public.
“In whatever work we do, we need to have a complete understanding and absolute transparency about the nature, size, terms of the debt that is bearing on a particular country,” Ms. Lagarde said Thursday at the IMF and World Bank Group annual meetings in Bali.
She added that the IMF needs to understand the extent of the position of all of Pakistan’s debt, including lending from sovereign governments and from state-owned enterprises, so that officials can determine its debt sustainability.
Why China and U.S. Are Vying for Dominance in Pakistan
In Pakistan, China and the U.S. are clashing over China’s One Belt, One Road initiative. To understand what’s at stake, it helps to take a look at why China is in Pakistan in the first place.
Her statements indicate Pakistan could be forced to disclose the full extent and terms of Chinese lending it has received in recent years, as part of Pakistan’s participation in China’s vast global infrastructure-spending program.
An official in Pakistan’s Ministry of Finance said that Pakistan is fully compliant with internationally accepted debt-reporting standards, adding that “there are no debt secrets.”
Pakistan’s new prime minister, Imran Khan, who took office in August, says Pakistan needed $10 billion to $12 billion for what he described as a short-term financial crunch that should pass in the next six months. He blames the previous government for taking on too much debt.
“We will think 10 times before taking on more debt,” Mr. Khan told his cabinet Thursday during a televised meeting in Islamabad. “We’ve been taking on loans to pay back previous loans.”
He has asked ministers for a report on what the debt taken over the past 10 years had been spent on and told them future loans must generate sufficient returns to repay them.
Beijing’s spending binge in Pakistan and elsewhere has emerged as a flashpoint in its tensions with Washington.
Washington has accused Beijing of “debt-trap diplomacy” by lending countries money to pay Chinese companies to build infrastructure that the recipients can’t afford.
U.S. officials and lawmakers have said they don’t want taxpayer money, funneled through the IMF, to end up funding a bailout of China. But it is unclear how IMF money can be ringfenced.
Christine Lagarde, head of the International Monetary Fund, pictured in meetings in Bali, Indonesia, on Oct. 11. PHOTO: SEONGJOON CHO/BLOOMBERG NEWS
Pakistan Finance Minister Asad Umar formally requested IMF assistance Thursday to deal with the country’s ballooning trade deficit and falling currency during a meeting with Ms. Lagarde in Bali.
The formal request kicks off a process that typically takes at least a month before a loan can be disbursed.
Ms. Lagarde said an IMF team would visit the Pakistani capital of Islamabad in coming weeks to begin negotiating the terms.
The IMF staff will establish the conditions Pakistan must meet to remain eligible. Then the bailout must be approved by the IMF’s executive board.
The U.S. has by far the largest voting stake on the IMF’s board, enabling it to exert influence on IMF loans when it chooses, but it doesn’t have a veto.
While Mr. Khan’s administration has been careful to say it supports the Chinese program, it also has quietly started a reassessment of it.
On Thursday, Mr. Khan singled out a $1.6 billion loan taken from China to build a metro rail service for the eastern city of Lahore. Mr. Khan said it “isn’t creating wealth but creating a deficit.”
Mr. Khan, who had vowed in the past to rid Pakistan of its dependence on Western financing, had been resisting an IMF program, with officials suggesting the country could make up its financial shortfall by getting funds from allied countries—Saudi Arabia, the United Arab Emirates and China—together with issuing bonds. But, with the markets spooked by this alternative plan, Pakistan announced Monday that it would seek a bailout from the IMF.
Pakistan says it is still talking to those three countries about a cash injection, but that hasn’t materialized so far.
https://www.wsj.com/articles/for-imf-help-pakistan-might-have-to-disclose-its-china-debts-1539234162
