US could choke Pakistan's request for IMF bailout package due to Chinese debt concerns

Reports suggest Pakistan has requested for $8 billion from the IMF. The US has said it would examine the country's current debt situation.

IMF chief Christine Lagarde with Pakistan finance minister Asad Umar. (Twitter/@IMFNews)

Months before Pakistan formally asked the International Monetary Fund for a bailout package, the US has said that no such financial assistance should be given if it is used to settle Chinese debts. And days after Islamabad made a formal request, the Americans remained steadfast in their 'objection.'

The IMF confirmed on Thursday that Pakistan had made a formal request for financial assistance to rise from financial doldrums. It is being reported that the bailout package sought could be to the tune of $8 billion. Even as an IMF team is now getting ready to touch down here for talks, the US is keeping a close watch. "In all cases, we examine that closely from all angles of it, including Pakistan’s debt position, in evaluating any type of loan programme," said Heather Nauert, US State Department spokesperson.

Nauert also blamed Pakistan's current economic woes on debt it had racked up with China. "I think part of the reason that Pakistan found itself in this situation is Chinese debt and the fact that there is debt that governments have incurred that they maybe thought wouldn't be so tough to bail themselves out of, but has become increasingly tough."

The economic situation in Pakistan is indeed alarming.

By their own admission, the country is in desperate need of an IMF bailout package just to stay afloat. "The number that we need to borrow, according to the budget, is $9 billion," finance minister Asad Umar had told the country's senate in August. But money won't be coming easy.

US secretary of state Mike Pompeo had made it amply clear months ago that American dollars should not be given to settle debts with China. Experts now say that it is highly unlikely that IMF would turn a deaf ear to one of its largest contributors even if a fraction of what Pakistan has asked for could be granted. What and how the Imran Khan government does with any possible deal with IMF remains to be seen.