WASHINGTON   -  US Secretary of State Mike Pompeo has warned that any potential International Monetary Fund bailout for Pakistan’s new government should not provide funds to pay off Chinese lenders.

In an interview with CNBC television on Monday night, Pompeo said the United States looked forward to engagement with the government of Pakistan’s expected new prime minister, Imran Khan, but said there was “no rationale” for a bailout that pays off Chinese loans to Pakistan.

“Make no mistake. We will be watching what the IMF does,” Pompeo said. “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 bondholders or China itself,” Pompeo said.

The Financial Times reported on Sunday that senior Pakistani finance officials were drawing up options for Khan to seek an IMF bailout of up to $12 billion.

An IMF spokeswoman said: “We can confirm that we have so far not received a request for a Fund arrangement from Pakistan and that we have not had discussions with the authorities about any possible intentions.”

Pakistan is struggling to avert a currency crisis that has presented the new government with its biggest challenge. Many analysts and business leaders expect that another IMF bailout, the second in five years, will be needed to plug an external financing gap.

Pakistan, which already has around $5 billion in loans from China and its banks to fund major infrastructure projects, had sought another $1 billion in loans to stabilise its plummeting foreign currency reserves.

Officials in the Trump administration, including US Treasury Secretary Steven Mnuchin, have criticised China’s infrastructure lending to developing countries, arguing that this has saddled them with unsustainable debt. The $57 China-Pakistan Economic Corridor, a series of port and rail improvements associated with China’s One Belt One Road infrastructure push, has led to massive imports of Chinese equipment and materials, swelling Pakistan’s current account deficit.

Pakistan has had 14 IMF financing programs since 1980, according to fund data, including a $6.7 billion three-year loan program in 2013.

Pakistani envoy meets US

defence secretary

The strain relations between Pakistan and United States moving towards thaw as Pakistan’s ambassador to the US Ali Jahangir Siddiqui on Monday met with the US Secretary of Defence General James Mattis. Bilateral ties were discussed in the meeting that took place on Pakistan’s request. The Pakistani ambassador visited Pentagon, the headquarters of the US Department of Defense, where among other things discussed were Pakistan’s ties with Afghanistan and the regional security situation.

Earlier this month, Siddiqui had said both Pakistan and the US were aware of the issues surrounding bilateral ties. Speaking to a private TV channel in Dallas, the Pakistani envoy said the two countries were working towards the restoration of their bilateral relationship.

Siddiqui has earlier stressed peace in Afghanistan is his top policy priority and Pakistan remains committed to ending regional conflict. In an interview to Bloomberg TV, Siddiqui said Pakistan was working on a second portion of a fence at its border with its war-ravaged neighbour Afghanistan. The fence is a clear sign of Pakistan’s interest in ending the regional conflict and will help Pakistan and Afghanistan equally in doing so, Siddiqui said.

US Army Lieutenant General Austin Miller, Trump’s nominee to head the US-led coalition in Afghanistan, said in a statement to a Senate panel last month that Pakistan had made “many sacrifices” and “its security forces have fought bravely,” but “we have not yet seen these counter-terrorism efforts against anti-Pakistan militants translate into definitive actions against Afghan Taliban or Haqqani leaders residing in Pakistan.”

“Until we complete this fence, it’s unreasonable to say we aren’t doing anything,” Siddiqui had remarked.