US senators ‘concerned’ over Pak’s potential bailout requests to IMF

As many as sixteen US senators have expressed concern over possible International Monetary Fund (IMF) loans to countries who have accepted “predatory Chinese infrastructure financing”, a private media outlet reported on Saturday.

In a letter addressed to Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo, the senators have asked how the Trump administration planned to address “the dangers of China’s Belt and Road Initiative (BRI)”.

The China-Pakistan Economic Corridor (CPEC) is a part of BRI, and involves billions of dollars-worth of infrastructure development and establishment of energy projects in Pakistan. However, the development has also involved China extending loans to Pakistan as Islamabad battles to save itself from a balance of payments crisis due to a widening current account deficit.

“How can the United States work with allies and partners to educate countries about the risks of Chinese infrastructure loans,” and how can the US “work with allies and partners to assist countries struggling to repay debts due to BRI” are two more questions. The letter also asks for an answer to how the US can “work with allies and partners to present an alternative to developing nations regarding investment and infrastructure funding”.

The letter cites a Center for Global Development estimation that 23 of the 68 countries currently hosting BRI-funded projects are at risk of debt distress, while in eight of those countries, “future BRI-related financing raises serious concerns about sovereign debt sustainability”.

Citing the study, it also complains that China does not follow the disciplines and standards that other major sovereign and multilateral creditors have adopted, “and in the process, debt levels and dependence on China are rising.”

It claims Beijing uses this debt to extract “onerous concessions, including equity in strategically important assets”, while also influencing the borrowers’ foreign policy decisions.

The examples of Djibouti in Africa and Montenegro in Europe are also given as examples of the spread of BRI projects and related Chinese influence.