Tuesday, October 22, 2019
 News Details
Pakistan getting drowned day after day, due to debts

by Farooq Ganderbali

A number of road projects related to the $52 billion China-Pakistan Economic Corridor (CPEC) are said to be in the doldrums as Pakistan's National Highway Authority (NHA) faces a financial crisis. Reportdely contractors have stopped work on several CPEC projects after their cheques worth over Rs 5 billion bounced. The affected projects include Hakla-Dera Ismail Khan, Western Route of CPEC and all sections of the Karachi-Lahore Motorway.

According to the report, not only the CPEC projects but local industries related to construction and a large workforce of engineers and labourers were also hit by the situation. The CPEC will connect China's Xinjiang region with Pakistan's Gwadar port giving it access to the Arabian Sea.

Pakistan is already dealing with a balance of payments crisis. The country’s structural problems are homegrown, but what is different this time around is an added component of Chinese debt. Pakistan is the largest Belt and Road (BRI) partner adding another creditor to its already complicated economic situation.

Pakistan’s system is ill-equipped to make changes which would avoid future excessive debt. A bailout from the International Monetary Fund (IMF) is probably the safest bet for the country although it is unclear whether the United States will support the program. How Pakistan decides to handle its debt crisis could provide insight into how the U.S., IMF, and China will resolve development issues in the future. Beijing is a relatively new player in the development finance world so much is to be learned from how it deals with Pakistan and how it could possibly maneuver in other developing countries in Asia, Africa, and Latin America.

By the end of June 2018, Pakistan had a current account deficit of $18 billion, nearly a 45 percent increase from an account deficit of $12.4 billion in 2017. Exorbitant imports (including those related to the China-Pakistan Economic Corridor (CPEC)) and less-than-projected inflows (export revenues and remittances) have led to a current account deficit widening, with foreign currency reserves levels covering less than two months of imports—pushing Pakistan towards a difficult economic situation.

The relationship between China and Pakistan is like that of a rich businessman who is having an affair with his maid. No one can predict what the businessman could to do to his maid. The entire world knows that the terrorist nation Pakistan has found its new friend in the form of China, after several nations including United States started to reduce the financial aid to it. But now Pakistan is getting drowned day after day, due to the debts. China is slowly trapping every small nation around it using the weapon of giving loan and the first nation to fall to this trap is Sri Lanka.

(The author is a Kashmir based senior journalist & columnist)

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