Pak defends economic partnership with China

Pakistan on Wednesday defended its economic partnership with China, amid fears that the terms of opaque multi-billion dollar investments by Beijing could be exacerbating Islamabad’s economic woes as it considers a fresh IMF bailout.

“We have noted recent media reports questioning the viability of China Pakistan Economic Corridor (CPEC), claiming that it would create an unbearable debt burden for Pakistan,” the government said in a statement issued to the media.

“Such media reports are often one-sided, distort facts, and are based on irresponsible statements by individuals who either have no understanding of CPEC or are driven by ulterior motives,” the statement continued.

CPEC is an ambitious plan by Beijing to build infrastructure in Pakistan, mainly energy and transport, connecting the western Chinese region of Xinjiang with the Arabian Sea.

It is part of China’s massive “Belt and Road” initiative seeking to revive ancient trade routes through a massive rail and maritime network via USD 1 trillion in investments across Asia and Europe.

But the opaqueness of the CPEC terms has led to concerns as Pakistan faces a looming balance-of-payments crisis, with analysts saying it will need to take urgent action, potentially seeking a bailout from the International Monetary Fund (IMF). “It is because of the favourable financing arrangements that Pakistan opted for Chinese investment under CPEC,” said the statement, issued under the caretaker administration currently running the country pending the formation of a new coalition government by election winner Imran Khan. “China stepped forward to support Pakistan’s development at a time when foreign investment had dried up, and economic activity was being crippled by energy shortages and infrastructure gaps,” it said, calling CPEC a “win-win”.

Chinese energy companies have “raised funds from Chinese banks and investors”, and these do not constitute any debt obligation on Pakistan, the statement said.

“CPEC projects are financed through a composite financing package comprising long-term governmentto-government concessional and preferential loans, as well as grants from the government of China. Repayments on these loans would not commence in the immediate future,” it added.

The details come after US Secretary of State Mike Pompeo voiced concerns in July over any IMF bailout being used to repay Islamabad’s debts to China, with whom Washington is engaged in a trade war.

We’ve noted media reports questioning the viability of China Pakistan Economic Corridor, claiming it would create an unbearable debt burden for Pak. Media reports are often one-sided, distort facts, and irresponsible. —Pak Govt statement