IMF loan to pay off Chinese debts? US puts 'dampener' on Pakistan plans

If IMF shuts its doors on Pakistan, the country may have to lean further on China for more borrowings.

IMF loan to pay off Chinese debts? US puts 'dampener' on Pakistan plans
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After questioning the fairness of the recently held elections in Pakistan, the United States has fired yet another salvo with Secretary of State Mike Pompeo warning against any bailout package for the country from the International Monetary Fund (IMF) which could then be possibly used by Pakistan to pay off Chinese debts.

In an interview to CNBC, Pompeo said the US is monitoring developments that could take place this month related to Pakistan approaching IMF. "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 — to bail out Chinese bondholders or China itself," he said.

While the new government in Pakistan - set to take oath on August 11 - is likely to cosy up to China, it is also in dire need of a financial bailout package. Many expect the Imran Khan-led government to approach IMF immediately after officially coming to power. The country has already received 12 bailout packages from IMF so far.

Pakistan-based Dawn reports that in case IMF shuts its doors, the country may have to further lean on China to borrow much-needed funds. There are already reports in Pakistani media that China has agreed to pour in more foreign exchange - over and above CPEC funding.

And while Pakistan-China relations may further strengthen, Pompeo's statements strongly signal - yet again - that relations between the US and Pakistan are close to rock bottom and unlikely to revive in the foreseeable future.

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