WASHINGTON: A bipartisan group of 16 US senators urged the Trump administration to block the International Monetary Fund (IMF) from bailing out the countries that have obtained loans from China under its infrastructure development plan.
The letter to Secretary of State Michael Pompeo and Treasury Secretary Steve Mnuchin mentions Pakistan, Sri Lanka and Djibouti among the countries that have accepted billions of dollars in loans from China but are unable to repay.
The loans come from the $8 trillion Belt and Road Initiative (BRI) that China says is meant to develop infrastructure in friendly countries for linking them to global trade routes.
But US senators disagree.
“We write to express our concern over bailout requests to the IMF by countries who have accepted predatory Chinese infrastructure financing,” the 16 senators said in the letter they sent to the two secretaries earlier this week. They claimed that China was using the debt to control the policies of the borrowing nations.
The IMF is an international lending institution and the United States is its largest contributor with some $164 billion in financial commitments. In 2016, the IMF agreed to pay Sri Lanka a $1.5 billion bailout loan to cover debts the country owes China.
Recently, reports in the international media claimed that Pakistan may soon seek up to $12 billion from the IMF to overcome a widening foreign exchange deficit.
But media reports claimed that Pakistan may use that money to repay the loans it borrowed for the China Pakistan Economic Corridor (CPEC), which is linked to the BRI. Pakistan rejected the claim, saying that it had no intention of using IMF money for repaying China.
But Secretary Pompeo told CNBC news channel last week that Washington was watching. “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 bond holders or China itself,” he said.