The China-led Belt and Road Initiative (BRI) is putting strain on Pakistan’s public finances and currency, some are saying, casting a shadow over Xi Jinping’s signature connectivity plan.
Jonathan Rogers writes in The Asset on potential hiccups for the grand infrastructure scheme.
“[Pakistan’s] current account worsened substantially last year on the back of a sharp increase in imports due to trade activity related to the Belt Road initiative.
“This in turn has put pressure on the Pakistan rupee, which was the worst performer in the Asian currency complex last year and which has experienced downside revaluation pressure since December, with two sharp legs down met with a depletion of the central bank’s foreign exchange reserves.
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“Pakistan had signed up to Belt Road-related projects to the tune of US$60 billion, including plans to build power plants and a railway linking Western China with the Pakistani Indian Ocean port of Gwadar. But political dial back prompted the Pakistani government to withdraw from a joint venture with China to develop the Diamer-Bhasha dam in Kashmir last November.
“That pullback apparently came as the Pakistan authorities baulked at the use of Chinese companies and labour that was stipulated under the terms of the Belt Road agreement. Above and beyond the politics, the economics would strain Pakistan’s balance of payments given that the bulk of the work would appear on the import side of the country’s trade balance with China.”
Pakistan is not the only BRI country that has pulled back from Chinese-led projects. Nepal reportedly scrapped a US$2.5 billion deal to build a hydroelectric dam with the Chinese state company China Gezhouba Group. A new administration abandoned the plan last November, saying the deal was signed without an open tender process, which is required by law.
“Full transparency – through competing public tenders – of the adequacy, suitability and quality of the Chinese equipment being used,” The South China Morning Post reported last November, “could soon become a serious problem.”
In Pakistan, security and local politics also loom over potential projects. China reportedly pulled the plug on US$1 billion worth of road projects late last year, a decision made amid local political infighting.
Pulling money from projects is “China’s way of conveying a diplomatic yet strong message to the Pakistanis: We will pay, but only on our terms,” the European Foundation for South Asian Studies, an Amsterdam-based think tank, was quoted by CNBC as writing. The decision was “a temporary punitive step to affirm control,” according to the think tank.
“Pakistani ministries charged with carrying out the projects have incurred delays because of infighting … Concerns that the project bypasses Pakistan’s poorer regions and will mainly benefit the financially-strong province of Punjab has made politicians argue,” the group said.
Security risks are also lurking below the surface. China has reportedly been discreetly holding talks with separatist groups in hopes of protecting infrastructure projects.
Rohit Pandeya Even Americans did have proof that OBL was in Pakistan otherwise they would have every excuse to invade Pakistan and threw dead body of OBL into ocean just like WMD which were never discovered in Iraq whereas Yadav was captured on Pakistan’s soil. If he had been captured in Iran then at least Iranian government would have officially protested and moreover Indian government was still carrying on projects on the fishing harbor of Chabahar
Venugopal Gopalsamy Lol jab tumharey pas kuch kehney ko bacha nai to economy ko le ao. Tum Hindustani kanjar hi raho gey
I am living in Canada though not national of Canada. I traveled to Pakistan and India both countries. I am finding tremendous progressive changes in Pakistan as far as tourism is concerned whereas in India there are not much changes, same stingy environment. One of locals in Northern part of Pakistan told me that more than one million plus ordinary volume of tourists visited last year and there was shortage of accommodation and a local financial institution has given interest free loans to local to set up accommodation s for tourists. So let dogs bark our caravan of progress will continue!
Rohit Pandeya I guess you are talking about your Randian fellows right ?
You all said right. Pakistanis are waiting desperately to complete this project even their currency is going down.once project is finished than they will show the true colors to Chinese
Aniruddha Singh Rajput if you think you can push China away in the name of religion, you must be joking. In the the first place Pakistan should have gone to Islamic countries to borrow money for the projects. You have signed means you have signed, and MUST pay. Period!
Fabricated mf
Aniruddha Singh Rajput , Ghar wapasi like activities are only possible in modi land.
Vivek Gupta India too is financing projects in Nepal. , Bangladesh etc, copying Chinese model.
Manzar Sarfraz Lol… paindoo Hindustanis have voted modi so modi can buy weapons worth $100b while poor Hindustanis are forced to prostitution in Gulf and toilet cleaning in America and Europe
Lol, India has already raised red flag.
Vinay Pharasi I would rather say.. ye itne begairat log hai.. Apne hi ghar mein Chinese se pitenge…
Aniruddha Singh Rajput very true
Aniruddha Singh Rajput whole subcontinent is the land of hindus
There is a hands in veil in all those Chinese BRI that went down the other way. And its none other than India. India does not to derail Chinese project that will of course benefit the whole Asian countries. But India is in no way to give up its soveriegnty claim on Kashmir and Baltistan plus India wont allow to give up its strategic control of Chinese energy route that runs via Malacca strait by allowing Pakistan to give a short cut through pakistan provinces.More India is concern about Chinese military access from east ,north and west. So it is Sure that India will do its best to derail BRI. BUt India has given themselve a option to join the project but only if BRI san CPEC. the ball is in Chinese court wether to agree on Indian terms and get the project sail smoothly or to fight the storm swelling before it. China with its big economy can make the project success but with double cost if they keep India unhappy. A palace built with the cost of trillion can be bring down by using just a few thousands dollar.
Mukhtar Ary pakistan has refused rescheduling of imf loans last week
Alpesh Shah tourism has already trippled in pakistan
Venugopal Gopalsamy so much of your frustration
I hope you feel better now
And us standing strong showing one high to yanks and their allies and better yet economy is on fast track stop watching Indian news it makes you dumb
Vijaykumar Kumar Srivastava Its not try and visit pakistan It’s best place on earth and for lookouts
Arun Kumar Pathak yeah just like Russians and Americans have tamed us
Aniruddha Singh Rajput rajputes are in control of current Pakistani government as always but I bet you never heard of it
Do your research and if I’m right then you can agree with me on one point that Indian media is making you ppl ill informed about Pakistan for ages.
Ojas Bhatt bewaqoof ye tumhari koi khawahish Tao ho sakti he warna hum hum yahan kisi ki bi nahi chalne dete tum apni taraf hi dekh 70 saal se dushmani he Lakin tumhari jurrat nahi ke Pakistan ke ander a sako
Chinse business oriented hain larake nahi wo hum hain
China ke khatir pakistan mein koi nahi lare ga Lakin hum boht saare Chinese ko china mein Lara sakte hain.
Kps Rao boht saare Raos Musalman ho chuke hain yaqeen nahi tao Pakistan mein akar dekh lo lakin tumhain nahi pata
Hinduism ko bhool jao
Kps Rao
WAS a land of hindus….
Nit Is
Development in real term related to the use of wealth and innovation… both the components are missing here. This is nothing but cosmetic development thorough lending of money and creation of jobs. That cannot sustain.
Your new colonial father can do no wrong????????????????????
Aniruddha Singh Rajput I don’t think so Chinese r the most shrud ppl they will take control of pakis they can do anything to get back there money
Why are you taking so much pain for us my dear friend I hope India envoy for the project is not the reason ? Let us see what China mighty is capable of?
Live long Pak China friendship
Raja Naveed Anjum ..Ya Ya, you can see what your Mighty friend China is capable of, wait for 5-10 years & you will see for yourself..& coming to our envoy, we don’t sponsor terrorism unlike you which your former PM himself admitted..God save Nawaz Sharif now..
Vijaykumar Kumar Srivastava you are totally wrong .. there is no wahibism in Pakistan
To much of rubbish, Japan, Korea and a host of pharma companies from all over the world are making wind fall profits for the past 50 years , none has been kicked out , for being non Muslim.
It is simple finance and economics…… Imports are increasing as the machinery is being imported (remember this is not a cost but an expense) it will start generating its revenue in the time to come…..
As exports will start to rise the economy will stabalize… and even devalued currency will help in making export led market……
The debt will be an issue for next 2 -3 years but it will stablize