Representative Image
Representative Image

Is Pakistan on back foot after China's 'debt-trap diplomacy'?

ANI | Updated: Jul 26, 2018 19:31 IST

Islamabad [Pakistan], July 26 (ANI): In a win-win situation for China, its longtime friendly neighbour Pakistan - currently awaiting its new government post July 25 general election - is reportedly in huge debt crisis because of the USD 62 billion China-Pakistan Economic Corridor (CPEC) plan for the country.
In an article, titled "China's Global Building Spree Runs Into Trouble in Pakistan" for The Wall Street Journal, writers Jeremy Page and Saeed Shah have analysed how Pakistan's external debt and the money it needs to borrow yearly have increased sharply, partly due to the infrastructure program China launched in 2015.
Citing example of the Orange Line metro project currently underway in Lahore, the writers have explained how only after three years, Pakistan is heading for a debt crisis, caused in part by a surge in Chinese loans and imports, which Pakistani officials say will now require public subsidies to operate.
Quoting a senior Pakistani official, the article stated that Pakistani authorities have fallen behind on payments for electricity from new Chinese power projects - the bulk of the infrastructure program - because of longstanding problems getting Pakistanis to pay their bills.
And the situation is likely to turn more problematic for Pakistan. "Pakistan's new government is likely to seek a bailout from the International Monetary Fund (IMP), the nation's first since 2013, according to Pakistani officials. Such a bailout would likely include restrictions on borrowing and spending, the officials say, which would force the country to curtail its 'Belt and Road' program with China, known as the China-Pakistan Economic Corridor, or CPEC," the article read.
It further added that with its global plan, "Belt and Road Initiative," involves some 70 countries, China aims to "open new East-West trade routes, generate business for Chinese companies and expand its strategic influence".
"China has mostly extended loans in opaque deals often contingent on using Chinese contractors. Pakistan is now one of several countries grappling with the financial and political fallout of taking on so much Chinese debt," The Wall Street Journal reported. About half of the planned CPEC projects in China have been started.
"You're then effectively having the West bail out this country. If this is where Pakistan ends up financially, I think that's going to be a big kind of black mark against the entire Belt and Road," said Andrew Small, an expert on China-Pakistan relations at the German Marshall Fund, a Washington think tank.
It also would give the United States a strong influence over China's plans in Pakistan, and Washington has been pushing back against what US officials have called Beijing's "debt-trap diplomacy," the article mentioned.
European Union and Indian officials have also stepped up criticism of Belt and Road, saying it lacks transparency and sustainability and is designed to expand China's strategic influence.
While US Defense Secretary Jim Mattis earlier tagged this to Ming Dynasty, Chinese President Xi Jinping, on the other hand, rejected such criticism and said in a conference in April that his infrastructure program was neither a Chinese conspiracy nor a would-be Marshall Plan, but an attempt to build a "community of shared future."
With such initiatives, China is "building and financing a global network of trade and energy links to fill gaps in existing infrastructure spanning Asia, Europe and Africa," the writers claimed.
They have stated that Pakistan is not the only nation on the receiving end.
"In Malaysia, the second-biggest recipient of Belt and Road loans after Pakistan, a new government suspended work this month on a USD 20 billion Chinese railway project and is reviewing other Chinese projects. Myanmar is trying to renegotiate a USD 10 billion Chinese port project. Nepal has halted plans for two Chinese-built hydroelectric dams since November," the article stated. "I can't see how the money would be repaid" said one senior Pakistani official involved in discussions with China.
Meanwhile, the IMF would likely require Pakistan's new government to be more transparent about existing CPEC projects. "Deals like the Orange Line cannot be secret," said Chaudhry Fawad Hussain, spokesman for the main opposition Pakistan Tehreek-e-Insaf (PTI) party. IMF representative in Pakistan, Teresa Daban said: "The new government (of Pakistan) will have to do some adjustment, with us or without us."
For the same, Nadeem Javaid, chief economist of Pakistan's planning ministry, has suggested that China should rescue Pakistan with an interest-free loan.
He said: "It would be a kind of favor," he says. If not, "for what do we have this friendship?" (ANI)

iocl