–Finance Ministry says Pakistan committed to ‘undertaking and completing CPEC projects in totality’
–Ex-FM Miftah Ismail says loans from China to be repaid in 30 years with first five years as grace period; Till 2023, total payment, including interest and principle, won’t exceed $1bn
–Foreign Minister Haroon says ‘there’s absolutely no reason for anyone to intervene in Pakistan-China relationship’
ISLAMABAD: Pakistan on Wednesday dismissed US concerns that any new International Monetary Fund (IMF) bailout for the country would be used to repay Chinese debt as “totally wrong”.
Pakistan’s economy has hit severe turbulence over the past year and most analysts expect Islamabad 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 neighbours at a time when relations between Islamabad and Washington are fraying.
US 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.”
Commenting on the issue, former finance minister Miftah Ismail said that most of the loan arrangements from China have 30 years repayment period with first five years as the grace period.
“Till 2023, including interest and principle, the total payment isn’t more than $1 billion. Therefore, Pompeo’s objection that Pakistan can use the proceeds from IMF to repay China is uncalled for,” he said, adding that the financing rate is approximately two percent, which is contrary to the perception that those loans are at higher commercial rate.
Addressing a media briefing in Islamabad on Wednesday, Interim Foreign Minister Abdullah Hussain Haroon said, “Why I believe that this statement is completely inappropriate is because China holds $3 billion in American deposited bonds and reserves and I am a little bewildered as to why this [Pompeo’s statement] needed to be said.”
He said that the government is determined to complete CPEC projects and that “there is absolutely no reason for anyone to intervene in the [China-Pakistan] relationship”.
“It is the stated position of this government that it is totally wrong to link any IMF package with CPEC,” he said, adding that third parties cannot weaken our collective resolve to make CPEC a success story.
He also stated that the present caretaker government does not have a mandate to decide on any IMF package, which is why it made no sense for the US to raise the issue at this point in time.
Haroon also said that “Pakistan has paid every price that it could pay” for the so-called ‘War on Terror’ that has now been ongoing for over 17 years.
“Those who ask us to do more should consider what their own role has been [in the war],” he said.
“Individual licenses have been issued to India for high-technology weapons, thus enhancing US-India bilateral defence trade. The sum being credited to this account is $9.7 billion,” the foreign minister noted, adding that this was happening at a time that Pakistan is being told that “there is no money” when it asks for money owed to it by the US.
He also asked how relations between the US and Pakistan can improve when the Financial Action Task Force is throttling Pakistan’s neck.
Yet, the foreign minister added, Pakistan is ready to talk to both its eastern and western neighbours for the betterment of the region.
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 US has been concerned that China is saddling smaller countries with debt as a way to gain influence and control around the globe.
Pakistan is struggling to avert a currency crisis that has presented the new government with its biggest challenge. Many analysts and business leaders expect that another IMF bailout, the second in five years, will be needed to plug an external financing gap.
“Make no mistake. We will be watching what the IMF does,” Pompeo said.
“There’s 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,” Pompeo added.
On Tuesday, Chinese Foreign Ministry spokesman Geng Shuang said the IMF had its own standards and operating rules when cooperating with countries.
“I believe they will handle it appropriately,” he told reporters, without elaborating.