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.
Stuart Budgen how our loss? You have nothing to bring to the table.
China’s track record with their client countries had been well… Extornists. After seeing this no one is willing to touch CN. Sri Lanka Hampantota port is one example.
There goes the China commie pigs again. .. trying to cheat and bully their way to benefit themselves.
Basic anti western ideas you have.
Your loss.
Rohit Pandeya Iran never said it. He was caught red handed while killing Pakistani people
Sami Babloo jadhav was kidnapped from chahbahar and sold to you while OBD was a state guest so there is a difference betwen the two ………
Udham Sisodia no let’s talk about terrorists like Jadhav
What about tourists like osama? ????
Aniruddha Singh Rajput we haven’t signed any agreement with Chinese to dig out our resources. You are not good at spreading misinformation. We are digging out coal from Sindh and Chinese are not involved in it. You better slap your own face
Alpesh Shah you mean terrorists who control 50% territory of Afghanistan ??
Sami Babloo
How tourism increase in nation support terrorism..
Pakistan will never allow any non muslims country to loot in the name of investment..first let China complete this protect the pakistani muslims will kick non Muslims Chinese and force them to convert or leave land of Islam..
There is no way Pakistan will retract from CPEC, we have a three phased project implementation concept, which has little or no impact on other national discourse.Since one and all provinces are on the same page, turning back is not an option.
If executed with proper cooperation, BIR is a great multi-national projects that will make ASIA the economic hub of the world and leaving the westerners behind….
UE and US don’t want this kind of economic trade route because it is not beneficial to them…westerner politicians would rather see ASIAN economy divided because that is where they profit the most….using devide and conquer strategy to individually weaken the economy of each country and take advantage of it to foster their economic and military agenda….
It will need ALOT of military control to keep it from being disrupted by bandits, warlords and changes of Govt.
Pallab Kumar Sarkar dude, you are just triggered & frustrated. I don’t talk to such people.
Pallab Kumar Sarkar Bangatrash is slim infested with HIV patients and drug addicts under 25. Their new problem is terrorism because of the rogue regime installed upon the people of banglatrash. Lol they should have been competing with Indonesia, Qatar etc but they’ve don’t nothing except for just giving Bengali language to their people. Hahaha
Pallab Kumar Sarkar you are talking trash
Vivek Gupta Gwadar is a city with lowest crime rate.
Denis Sequeira sorry can’t believe Wikipedia… it promotes the narrative of Criminals intelligence agency.