China is now the biggest lender to Pakistan, including both public and private debt, but no figures are available about the amount of debt Pakistan owes to China. An estimate is that around $19-20 billion out of $90 billion total debt and liabilities of Pakistan is Chinese i.e. over one fifth of the overall debt. According to the SBP annual report, China bilateral debt to the government stood at $7.2 billion by Jun17.
This has increased by over $3 billion (from $4bn in Jun13) in the last four years. And now, China has surpassed Japan to become the single biggest bilateral lender to Government of Pakistan. Apart from bilateral debt, Pakistan currency swaps (which only exits with China) in Jun17 stood at $1.5 billion which brings the debt tally to $8.7 billion. The central bank safe deposit stood at $0.7 billion which is most likely provided by none other than China. That takes the total number to $9.4 billion.
A detailed analysis shows ICBC Pakistan branch has taken debt of $2.7 billion from the parent company by June 17. They brought the dollars in Pakistan and have done swap to run the operations in rupees. This takes the loan amount to $12.1 billion. China also happens to be the biggest lender to the private sector as well. There is no direct number to reach the Chinese loan to Pakistan private sector; but virtually all the increase in the last three years has come from China. The total private sector external loan increased from $3 billion in Jun15 to $7.2 billion in Dec17.
This is an unprecedented growth and mostly came in terms of IPPs' financing under CPEC and other projects. A reasonable estimate is that out of $4.2 billion increase in last 30 months, $3.5 billion is from China.
In addition to this, the debt liabilities to direct investors stood at $3.5 billion. This amount is loaned to foreign investors operating in Pakistan. The biggest investment by a foreign company in the last few years is from China Mobile and by a conservative estimate, $1.5 billion is the loan to China Mobile. Adding $1.5 billion to $15.6 billion takes the toll to $17.1 billion. Now most of these numbers are based on June 2017 and Pakistan's total external debt and liabilities increased from $83.1 billion then to $88.9 billion by Dec17. The debt has rapidly increased by $5.8 billion in the last six months and is still growing.
It is safe to estimate that Chinese liabilities have reached $19 billion. The need to raise further debt today is pressing for the economy to continue the growth path. Currently, western multilaterals and others are tightening their grip on Pakistan because of falling import cover. In order to continue the growth momentum, Chinese loans are imperative. But going back to the IMF is also inevitable which will surely hurt the growth momentum. Based on the above calculation, roughly speaking, $10 billion debt is CPEC related funding and $3-4 billion came as FDI under CPEC. This is mere one fourth of the total CPEC commitments and both Chinese investment and loans are bound to increase in next five years.
Needless to say, the present debt acquiring strategy is counterproductive in the long run. As it is, Pakistan's debt fueled growth is not sustainable and the country would find it really difficult to repay the loans. It is therefore important that we develop alternative ways to meet our development needs, specially exports which have declined steeply in the last four years.