International Monetary Fund Managing Director Christine Lagarde on Thursday announced that she would send a mission to Pakistan for bailout negotiations amid emphasis on full disclosure of the debt Pakistan has acquired including from China.
In a statement, Lagarde said she met with Finance Minister Asad Umar, State Bank Governor Tariq Bajwa and members of their economic team. “During the meeting, they requested financial assistance from the IMF to help address Pakistan’s economic challenges,” Lagarde said. During the meeting, financial assistance was requested from the IMF to help address Pakistan’s economic challenges, she said.
The formal request follows an apparent 7 per cent central bank devaluation of Pakistan’s rupee currency on Tuesday. “An IMF team will visit Islamabad in the coming weeks to initiate discussions for a possible IMF-supported economic programme,” Lagarde said, adding that the Fund was looking forward to a continuing partnership. After failing to find alternative sources to bridge a $10-billion financing gap in the current fiscal year, Umar on Monday announced that Pakistan would approach the IMF for a bailout package – the second in the past five years.
Both Pakistan and the IMF have already covered significant ground during a week-long staff-level visit of an IMF team to Pakistan that ended last week. However, some thorny issues remained to be addressed including the extent of new measures and disclosure of details of China-Pakistan Economic Corridor projects. Before meeting Umar, Lagarde shared IMF’s concerns about financing details of China’s Belt and Road Initiative while addressing a press conference. CPEC is a pilot project of the BRI.
To a question about CPEC-related debt concerns, Lagarde said “whatever work we do, we need to have a complete understanding and absolute transparency about the nature, size and terms of the debt that is bearing on a particular country.” “And to really understand the extent and composition of that debt, both in terms of sovereign, in terms of state-owned enterprises and the like of it, so that we can actually really appreciate and determine the debt sustainability of that country, if and when we consider a programme.”
Of the estimated $60 billion in CPEC investments, over $28 billion worth of projects are currently at various stages of implementation. Most of the investment, estimated at over $22 billion, has been made in the energy sector, which remains a concern for the IMF, according to sources in the planning ministry.
The federal government’s total debt swelled to 72.5% of gross domestic product by June this year, which is considered unsustainable for a developing country like Pakistan. In a cabinet meeting, Prime Minister Imran Khan instructed the finance ministry to provide a detailed analysis of utilisation of Rs24 trillion worth of debt that the country acquired from 2008 to 2018.
Responding to a question, Lagarde emphasised that the issue of debt transparency and appropriate understanding of debt was not only going to apply to Pakistan as it was applied to all countries.