US Congressional Hearing Discusses Pakistan’s Economic Crisis

US Congressional Hearing Discusses Pakistan’s Economic Crisis

December 14, 2018 0

The core purpose of US economic engagement with Pakistan is to ensure that it’s not a failure in the future and stops being such a poor country, says a senior official of the US Treasury Department.

1. David Malpass, Under Secretary of Treasury for International Affairs, told lawmakers during a Congressional hearing on Wednesday that the Trump administration also wants to ensure that any IMF loan to Pakistan is not used to repay its Chinese debt.

2. Pakistan is seeking an $8 billion extended loan facility from the International Monetary Fund (IMF) to bail itself out of a severe balance-of-payments crisis that threatens to cripple its economy. The two parties are still discussing the package and a final decision is expected early next month.

3. At this House Financial Services Committee hearing on international financial institutions, several US lawmakers expressed concern that Pakistan may use the IMF loan to repay some of the $60bn loans it is borrowing from China for CPEC.

4. Some lawmakers also argued that this huge Chinese debt was responsible for the economic challenges Pakistan was facing.

5. Congressman Ed Royce, a California Republican, reminded Mr Malpass that in July this year Secretary of State Mike Pompeo had said that there’s no rationale for using IMF and American tax dollars — that are part of the IMF funding — to bailout Chinese bond holders. What’s the administration doing to prevent this, Congressman Royce questioned.

6. “We will make strong efforts, and I believe successful efforts, to make sure that what you describe doesn’t happen, meaning a payoff of Beijing via Islamabad,” Mr Malpass said.

7. “But Pakistan has not been successful yet at all in finalising a package with the IMF. So, it’s something that we follow closely,” he added. “One of the things that we are aware of and do follow is that IMF loans tend to be shorter maturity loans and China’s loans to Pakistan have been longer maturity loans.” he continued.

8. When Mr Sherman demanded to know how Washington would make sure that Islamabad follows the conditions attached to an IMF package, Mr Malpass said: “We will look for ways that that round-tripping does not happen the way you described.”

9. Helping Pakistan overcome its economic deficiencies, however, was even more important, he added. “Important in this, in my view also, is the structural reforms in Pakistan that are necessary for it to stop being such a poor country,” Mr Malpass said.

Balach Khan
Balach Khan