IMF warns Pak on China risk

NUSADUA,INDONESIA: Pakistan has not yet formally approached the International Monetary Fund for financial assistance, but if bailout talks get underway this week, the goal will be to help Pakistan reach its full potential, the IMF’S chief economist has said.

Addressing a news conference at the IMF and World Bank annual meetings in Bali, the IMF’S Maurice Obstfeld cautioned on Tuesday that increased Chinese involvement in Pakistan’s economy could bring both benefits and risks.

Obstfeld said Pakistan is facing financing gaps as it has been hit by a large fiscal and current account deficit, a low level of reserves and a currency he described as “too rigid” and overvalued.

Pakistan needs more infrastructure development, Obstfeld added, and the country could benefit from China’s role in supporting its project financing.

But China’s involvement could also bring potential risks, he said.

“It is important that the design of the projects... be solid and excessive debts which cannot be repaid are avoided,” the IMF chief economist said.

Islamabad has cut the size of the biggest Chinese “Silk Road” project in Pakistan, a reconstruction of the main rail line between the port city of Karachi and Peshawar in the northwest by $2 billion, citing government concerns about the country’s debt levels.