Is the CPEC Loan to Pakistan actually trapping Pakistan into the Chinese debt? After Asian Development Bank warning to eight nations, including Pakistan, against unsustainable financing under CPEC and BRI, it appears that Islamabad is under a bit of pressure due to repayment of CPEC Loan, which has already swelled to $62B from original $46B.
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Pakistan has made some progress which is apparent from its fulfilment of the International Monetary Fund’s (IMF) bailout programme, but hurdles remain as Pakistan attempts to find a way through amid disturbing economic environment, depleting foreign exchange reserves and mounting CPEC Loan to Pakistan.
At the 51st Annual Meeting of the Board of Governors, Asian Development Bank (ADB) President Takehiko Nakao recognized Pakistan was somewhat improving, but also cautioned Islamabad over repayment of CPEC Loans.
According to Pakistan officials, Pakistan’s GDP might hit an all-time high at the end of the current financial year, from 4.1% in 2014 to 5.8% in 2018. However, the GDP growth has come on the back of enormous debt, and it is vital that the Return on Investment is viable so that the GDP trajectory remains positive. Pakistan’s total debt has surged to Rs 22.8 trillion, due to CPEC Loan to Pakistan.
Asian Development Bank Warns 8 Nations Against Chinese Debt Trap via BRI Project
Recently, IMF Managing Director Christine Lagarde said that the Belt and Road Initiative (BRI) can provide infrastructure financing to nations, but it should not be deemed “a free lunch”. Lagarde expressed concern over the rise in global debt due to BRI and warned that it would pose repayment challenges.
“If we invest borrowed money then we need the economic returns. If countries borrow too much without assessing economic viability it would cause repayment issues
This particularly holds true for many countries including Pakistan. What began as an investment project of $46 billion has now surged to $62 billion. This means that over the next 30 years, Pakistan repayment of CPEC Loans to China would be in hundreds of billions of dollars, which might be impossible pay. The IMF has already cautioned all the nations of severe implications. The president also mentioned about a possible trade war between the US and China. If the trade is interrupted it would severely damage Asian economies along with other nations.”
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