Yasmeen Aftab Ali |
One point needs to be clarified at the onset. Ability of US to influence IMF decision in awarding a bailout package to Pakistan. IMF is an institution based on quota system. The quotas awarded to different nations are a reflection upon its standing in the international comity of nations. US quota is 17.46 as opposed to Pakistan with a 0.43. US can influence the final analysis with her allies against Pakistan if Pakistan fails to meet the bars set to qualify. US is the largest contributor in IMF and holds sway over the decision. Therefore, the Finance Minister Asad Umar’s statement that “United States does not hold the power to veto decisions by the Fund” is not only ill timed it is also an uneducated one.
Whereas some reservations by US in awarding Pakistan a bailout package are ill founded others have a legitimate basis.
The first is the reservation expressed by US of examining Chinese debts before making a decision. This is a fair demand and one to which Pakistan has agreed. The facts however as they stand are:
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‘Three projects are costing US $6bn; Orange Line, M-5, and KKH phase 2. The Chinese government has not given Pakistan a commercial loan for these investments. This is a government to government soft loan at 2% interest rate. A soft loan offers lenient terms than otherwise available, longer repayment time duration and lower interest rates. The debt Pakistan has is US $6bn and not US $19bn as claimed. For the next five to seven years, Pakistan only needs to pay 2% interest. After this time period, Pakistan will have to repay the principal amount with interest of 2% spread over 13 to 15 years. So in lieu of loan of US $6bn after 20 years, Pakistan pays, give or take, US $7.4bn with interest.’ Excerpt from my blog for CRSS.
China has rejected the claim by US that she is pushing Pakistan in a ‘debt trap.’ Out of the projects launched under the flagship of Belt and Road Initiative of which CPEC has been made a part, 18 are financed through direct Chinese investment or with the Chinese assistance. “Only four [projects] have been using concessional loans [of roughly $6 billion] from the Chinese side to make sure that CPEC has not inflicted a debt burden on Pakistan, rather when these projects get completed and enter into operation, they will unleash huge economic benefits … and these will bring considerable returns to the Pakistani economy,” states Chinese State Councilor and Foreign Minister Wang Yi.
This aggressive posturing by the US is being viewed as an effort to curtail China in expanding her global influence at all costs.
“The US objectives in this region now are: the strategic containment of China and Russia, an India-dominated South Asia and the reversal of Iranian power. Pompeo’s position on the IMF package reflects a US attempt to exploit Pakistan’s financial vulnerability to retard the execution of CPEC and damage China’s broader Belt and Road Initiative objectives,” writes Munir Akram, former Pakistan ambassador to the UN.
Then there are other issues that do bring a furrow to the brow being a matter of deep concern.
The quota awarded by IMF is based on the size of the economy of loaning country and the voting power it exercises. Pakistan was allowed a bailout package of $6.2-billion in 2013. This is roughly 425% of the total quota allocated to Pakistan. Pakistan at this point in time still owes $6 billion to the IMF. This means exactly that Pakistan has drawn 214% of its quota. So even if IMF allows the balance quota of package to Pakistan after excluding funds owed, it will diminish the quantum of funds released.
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The core issue is that in spite of the many IMF bailouts, the funds have not been sagaciously utilized leading to projects benefits of which have not trickled down to the common man, ballooned costs of these projects that owes to corruption and weak institutions owing to appointments of favorites that not allowed Pakistan to rise above her problems.
Two issues need to be viewed by the prospective loaning authority. First, will the diminished loan be adequate to bail out Pakistan? Second, if IMF denies the relief to Pakistan, it will be pushing her deeper in China’s arms. For US this may be the opportunity to ‘unofficially’ pressurize Pakistan in Afghanistan. An ugly thought but who says politics is beautiful?
The writer is a lawyer, academic and political analyst. She has authored a book titled ‘A Comparative Analysis of Media & Media Laws in Pakistan.’ She can be contacted at: [email protected] and tweets at @yasmeen_. This Article was first published in pakpotpourri2.wordpress.com.