IMF dispels impression it would deny loan to Pakistan on US influence

The seal of the International Monetary Fund (IMF) at IFM headquaraters in Washington, DC. (Paul J. RICHARDS/AFP)

• US has limited voting power for approving Pakistan’s potential request for new program by IMF’s executive board
• Pakistan may be required to divulge greater details on loans obtained in order to allay US concerns

KARACHI: After a statement from US Secretary of State Michael Richard Pompeo (Mike Pompeo) which has put the International Monetary Fund (IMF) in an embarrassing position, the global lender has moved to dispel the impression that it would deny a loan to Pakistan under the influence of the US.
The resident representative of IMF, Teresa Daban Sanchez, met representatives/analysts of brokerage houses in Karachi in the weekend and discussed the current situation.
“A large part of the discussion was centered around the role of the US in Pakistan’s access to the IMF fund, the likely timing of program, and disclosures of funding from China on the CPEC project,” said Fawad Khan, analyst at BMA Capital, who attended the meeting.
About the influence of the US and Pakistan’s request for the new program, “the meeting highlighted the limited voting power of the US (16.7 percent) for approving Pakistan’s potential request for the new program by IMF’s executive board. The decision-making process may potentially cause delay in the approval of Pakistan’s request,” Khan added.
The IMF cannot deny a loan to Pakistan because of its membership of the lender but the country may be required to divulge greater details on loans obtained in order to allay the US’ concerns.
A recent statement from US Secretary of State Mike Pompeo had stirred controversy about a potential IMF loan to Pakistan which was dismissed by Pakistan as “totally wrong.”
Pakistan has categorically denied that the loans are intended to pay off Chinese debts.
Mike Pompeo had warned that any potential IMF bailout for Pakistan’s new government should not provide funds to pay off Chinese lenders.
“Make no mistake, we will be watching what the IMF does. 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,” said Pompeo in an TV interview.
Reacting to Pompeo’s statement, Pakistan’s former finance minister, Dr. Salman Shah, has termed the statement embarrassing for the IMF because it gives the impression that fund is being run as per the wishes of US.
Pakistan is in the process of forming a new government after the July 25 general elections. The new government will be in a position to decide, most likely by September, about availing the IMF bailout package to stabilize the wobbling economy.
Pakistan plans to seek up to $12 billion from the IMF as the country is facing a financing shortage of $25 billion to $28 billion. However, the IMF representative did not comment on the size and type of bailout program.
“The IMF has expectedly refrained from commenting on the need for the IMF program and options available to the government, along with the size and type of the program,” said Khan.
Sanchez also appreciated Pakistan’s central bank’s performance and recent policy measures in the form of the devaluation of the Pak rupee and hike in policy rate, according to Fawad Khan.