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Pakistan’s army chief seeks assistance from US amid rising default possibility

Pakistan’s most powerful man has reached out to Washington to request help in securing an early loan dispersal from the International Monetary Fund, as dwindling foreign reserves spark a scramble in Islamabad to avoid a default.

Gen. Qamar Javed Bajwa, the chief of Pakistan’s influential army, spoke by phone with U.S. Deputy Secretary of State Wendy Sherman in a highly unusual move earlier this week, according to sources from both the U.S. and Pakistan.

The sources, who requested anonymity because they were not authorized to speak publicly, said Bajwa made an appeal for the White House and Treasury Department to push the IMF to immediately supply nearly $1.2 billion that Pakistan is due to receive under a resumed loan program.

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Though Pakistan has an experienced administrator in Prime Minister Shehbaz Sharif, he does not have much credibility or political capital beyond Islamabad, and faces persistent pressure from ousted rival Imran Khan. Instead, observers say power lies with Gen. Bajwa, 61, an infantry officer who was supposed to retire three years ago but who managed to stay on through years of backroom politicking.

The IMF already granted Pakistan “staff-level approval” for the loan in question on July 13. But the transaction — part of the IMF’s $6 billion Extended Fund Facility for Pakistan — will only be processed after the multilateral lender’s executive board grants final approval.

The IMF is going into recess for the next three weeks and its board will not convene until late August. No firm date has been set for announcing the loan approval for Pakistan, according to an IMF official who also spoke on condition of anonymity. For Islamabad, time is of the essence.

Pakistan's

Without an immediate lifeline, the inflation-ravaged Pakistani economy will continue to hemorrhage. The rupee has been plummeting against the dollar, and the country has less than $9 billion in foreign reserves left, covering under two months of import bills. On Thursday, S&P Global downgraded Pakistan’s outlook to negative from stable.

According to the IMF official, there is a major difference between staff-level approval and board approval. “Our stakeholders, the countries that take the vote as to whether they are supporting this or not, make the final decision,” said the official. “This is a difference. So the legally binding step is a board approval, not the staff level agreement.”

The U.S. is the largest shareholder in the fund, founded in 1945. While Washington has voted for funding Pakistan in the past, the Trump administration openly expressed its reservations about the country using IMF loans to pay back China.

With comparisons being drawn to Pakistan’s crisis-plagued neighbor Sri Lanka, the stakes of default for the nuclear-armed Islamic republic are higher. Pakistan has a massive population of over 220 million; has borders with China, India, Iran and Afghanistan; is fighting Islamist as well as separatist insurgencies; and sits on the intersection of the Persian Gulf and the Indian Ocean.

Bajwa’s appeal comes in the wake of separate meetings between senior civilian Pakistani and American officials in July, none of which managed to negotiate an early disbursement of funds.

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