*ISLAMABAD – Pakistan defends its economic partnership with China, amidfears that the terms of multi-billion dollar investments by Beijing couldbe exacerbating Islamabad’s economic woes as it considers a fresh IMFbailout.*
“We have noted recent media reports questioning the viability ofChina Pakistan Economic Corridor (CPEC), claiming that it would create anunbearable debt burden for Pakistan,” the government said in a statementissued to the media.
“Such media reports are often one-sided, distort facts, and are based onirresponsible statements by individuals who either have no understanding ofCPEC or are driven by ulterior motives,” the statement continued.
CPEC is an ambitious plan by Beijing to build infrastructure in Pakistan,mainly energy and transport, connecting the western Chinese region ofXinjiang with the Arabian Sea.
It is part of China’s massive “Belt and Road” initiative seeking to reviveancient trade routes through a massive rail and maritime network via $1trillion in investments across Asia and Europe.
But the opaqueness of the CPEC terms has led to concerns as Pakistan facesa looming balance-of-payments crisis, with analysts saying it will need totake urgent action, potentially seeking a bailout from the InternationalMonetary Fund (IMF).
“It is because of the favourable financing arrangements that Pakistan optedfor Chinese investment under CPEC,” said the statement, issued under thecaretaker administration currently running the country pending theformation of a new coalition government by election winner Imran Khan.
“China stepped forward to support Pakistan’s development at a time whenforeign investment had dried up, and economic activity was being crippledby energy shortages and infrastructure gaps,” it said, calling CPEC a“win-win”.
Chinese energy companies have “raised funds from Chinese banks andinvestors”, and these do not constitute any debt obligation on Pakistan,the statement said.
“CPEC projects are financed through a composite financing packagecomprising long-term government-to-government concessional and preferentialloans, as well as grants from the government of China. Repayments on theseloans would not commence in the immediate future,” it added.
The details come after US Secretary of State Mike Pompeo voiced concerns inJuly over any IMF bailout being used to repay Islamabad’s debts to China,with whom Washington is engaged in a trade war.
On Tuesday Pakistan’s likely future finance minister Asad Umar announcedthat the decision on a possible IMF loan would be taken by “the end ofSeptember”.
“There is a general perception that we have picked up very expensive loansfrom the Chinese. I personally don’t think so,” he told reporters inIslamabad.
“They are like most commercial loans,” he said, denouncing the “lack oftransparency” by the previous government on the subject.
China’s financial largesse, in the form of the Belt and Road project, hasraised concerns over the vulnerability of poorer nations to such massivedebt.
Last year Sri Lanka was forced to hand over majority control of itsHambantota port to China after being unable to repay its loans.