- Pompeo’s concerns
Perhaps finance minister-designate (for all intents and purposes) Asad Umar should not have telegraphed his plan to knock at the Fund’s door as soon as the new government is formed. But that does not mean Washington would not still have objected strongly, as Mike Pompeo did the other day, convinced that US taxpayer dollars would end up bailing out runaway Chinese investors. For once, it seems ironically, Pakistan is happy to extend its problems beyond mere debt repayment – which the Americans assume the money is being borrowed for – since it sports one of the worst current account deficits anywhere in emerging markets, and needs a stitch up job more than repayments.
In the immediate term we need, quite simply, to avoid default which cannot be too far down the road. Our tax earnings have hardly budged in a decade, exports are still eclipsed by imports, and borrowing has been our life and blood since almost forever. Now there’s just no more money in the kitty – the last IMF program ended in 2016, and since then we’ve been borrowing from here and there, now and then, just to stay solvent. So any of the $12b we need urgently is not very likely to be routed to Chinese banks.
Yet repayment is also very much on the agenda. The finance ministry has yet to refute news reports about big repayments due next year, something the IMF is only too aware of. Since it’s unlikely that China will extend a non-CPEC $12b loan just because our deficit is the highest in living memory, IMF is really our only realistic solution. That reality would, of course, not be lost on Washington. Could it be, then, that it is laying the groundwork for more arm-twisting down the road? Maybe not just the usual austerity – that is always a part and parcel of IMF loans – but some political pledges, too, like helping end the Afghan war, etc, will be the deal this time.