Pakistan bailout: IMF wants details of jet, submarine deals with China

There are worries in the IMF Pakistan could use the bailout to repay Chinese loans

Yuan submarine Wiki A Chinese Yuan class submarine | Wikimedia Commons

A Pakistani newspaper reported on Monday that the International Monetary Fund (IMF) has insisted that Islamabad disclose details of ventures with China, including manufacture of JF-17 fighter jets and procurement of submarines, as a condition for sanctioning a bailout package that could be worth up to $12 billion.

Dawn reported, “the visit of an IMF mission to Islamabad for finalising a bailout package for Pakistan may be delayed as both sides are still engaged in an intense discussion.” In addition to requiring Pakistan to carry out sweeping economic reforms, the IMF has sought “full disclosure” on all financial cooperation between China and Pakistan. This includes “assistance related to infrastructure development, nuclear power plants, joint manufacturing of JF-17 Thunder fighter jets and procurement of submarines,” according to Dawn.

The newspaper added the IMF has sought details of commercial loans worth over $6.5 billion that Pakistan had received from China in the past two-three years.

“IMF officials were also seeking details of the China-Pakistan Economic Corridor (CPEC), along with a written guarantee from both Pakistan and China that the IMF assistance will not be used to repay loans to China,” Dawn reported.

The requirements highlight the fear in the IMF that Pakistan would use an IMF bailout to repay Chinese loans. Earlier this month, three US lawmakers urged the Donald Trump administration to oppose an IMF bailout to Pakistan on the grounds it would finance repayment of Chinese loans. China is investing over $60 billion in Pakistan as part of various projects under CPEC.

This is expected to be the 14th bailout package Pakistan is receiving from the IMF. Pakistan Finance Minister Asad Umar had announced in late March he expected the IMF bailout package to be secured by mid-May.

The JF-17 is the most high-profile strategic venture between Pakistan and China. The Chinese-developed fighter was put into production with Pakistani financing and the Pakistan Air Force is expected to have a fleet of over 150 JF-17 fighters. The JF-17 is expected to replace older Chinese and French-built fighters in the inventory of the Pakistan Air Force. In March, a state-owned media organisation in China reported the  JF-17 would getting a radar upgrade.

In December 2018, the New York Times reported China and Pakistan had a “confidential plan” to jointly build a new generation of fighter aircraft and other weapons in a special economic zone built as part of CPEC.

In October 2015, Pakistan and China finalised a deal to build eight conventional submarines. Four of the vessels would be built in China and the remainder in Karachi. The deal was a watershed for the Pakistan Navy as it has been operating French-built submarines for over 40 years.

The new submarines are thought to be variants of the Chinese Yuan-class ships and will begin delivery to the Pakistan Navy by 2022. In addition to being able to carry torpedoes and anti-ship missiles, there are fears Pakistan could use the new submarines to carry nuclear-armed cruise missiles for a 'second strike' capability against India.

Both programmes are perceived as being vital for the Pakistani military as it seeks to upgrade it navy and air force. Pakistan is also buying four surface warships from China.