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.
Anything can happen in ur dreams..
The Arabian Sea, also known as Sea of Oman, is a region of the northern Indian Ocean bounded on the north by Pakistan and Iran, on the west by northeastern Somalia and the Arabian Peninsula, and on the east by India. Wikipedia
Sami Babloo haha no bro,just tried to let you know where someone should put the right word . and the news was on dawn–newspaper from your country. still if someone doesn’t know the meaning of trash,then better request oxford dictionary to change the meaning of trash.and another point– hope you people be able to pay 90bn debt to china .otherwise the entire ‘trash word’ would be replaced with something else .peace bro.
Actually i agree with Sami. Thr problem with smaller countries like pakistan is they should use this opportunity to increase tourism and make it safe heaven for open minded tourist. But in religious extreme country its very difficult. Imagening biki i clad chinese tourism in gwadar is next to impossible. But chinese are best tourist with which reduce trade balance… there will be no point on big infra as pakistan compete manufacturing against china. Only positive pakistan should gain is choosing dubai model and use infra to get hige tourism influx. Or else yes china will eat up ur resources and other countries wont come in and dump money as market wouldnt be as lucerative and debt will be huge. . Pakistan needs its king salman.
Zahra Malik if we go by the past performance then so far the only beneficiaries have been the Chinese at the cost of poor nations by luring them into a debt trap.
Pallab Kumar Sarkar triggered ?
Sami Babloo haha. Please learn about the meaning of trash bro. Hope it will help you to know about the meaning of trash ….
https://www.dawn.com/news/1022800#comments
নব জাতক last time I heard Hindustan signed an agreement to provide a $2.5b loan to banglatrash hahaha
Korean, on both the sides are very intelligent if they come together there would be hectic economic development and progress, good for north Koreans, it will boost growth and good life for north Koreans
And then it says Chinese are negotiating with Baloch people lol why would they negotiate with them when they have already laid down their arms because they know India created a banglatrash in 1971 now they don’t want Balochistan to be a balochtrash ???? China should talk to Afghanistan where anti Pakistan terrorists are not just a threat to Pakistani citizens but also to Chinese citizens
Mukhtar Ary you could have used a better word but oh you’re a typical paindoo frustrated indian
Except IMF will rape Pakistan during next begging bid.
Arabian*
Lol right… he doesn’t even know that the Gwadar port is in Arabian Sea.
You lack logic… you’re Indian right ?
Lol… Pakistani balance of payment was in deficit even before the launch of CPEC. As for Gwadar, Gwadar is in the arabaian sea not in the Indian Ocean. If you writer of this article is trying to say that Pakistan must increase its exports and promote tourism then its fine otherwise it was rubbish ???? sorry to say that
CPEC is very important for China and Pakistan. Chinese must adress the small fears of smaller nations of south asia and take BRI to new heights by agreeing to better terms and conditions of contracts. Asia and Europe is being connected, those not joining will miss the train of development
The Belt and Road project would be as usefull as the Great wall of China was in protecting China from the North
I strongly disagree. Do you think these projects are viable?
These are all teething problems of a mighty ""Asian Marshal Plan"". These things are common in any major project in history. Chinese will turn this into a show piece in Asia. Soon the Western leaders and India will be signing up and forming a queue for visits to Beijing!