CPEC: Pakistan to repay $ 5 billion each year to China

CPEC: Pakistan to repay $ 5 billion each year to China
Shares

Pakistan's debt and other repayments on China's “Belt and Road” initiative will peak at around $5 billion in 2022, but will be more than offset by transit fees charged on the new transport corridor, says the Pakistan government's chief economist.

China has pledged to invest up to $57bn in Pakistan's rail, road and energy infrastructure through its vast modern-day “Silk Road” network of trade routes linking Asia with Europe and Africa.

Officials expect a huge uptick in trade between the two nations once Gwadar port is functional and work on motorways is finished allowing goods to cross the Himalayas to and from China's western Xinjiang province.

The China-Pakistan Economic Corridor (CPEC), a flagship “Belt and Road” project, has been credited with helping revive Pakistan's sluggish economy, but investors have raised concerns that Pakistan's currency could come under severe pressure once debt repayments begin and Chinese firms start taking profits home.

Nadeem Javaid, who advises Prime Minister Nawaz Sharif's government and works closely on the CPEC programme, told Reuters that such fears are misplaced as Islamabad would earn vast fees from charging vehicles moving goods from and to China.

Javaid said the Gwadar-Xinjiang corridor should be operational from June next year, and Pakistan expects up to 4 per cent of global trade to pass through it by 2020.

“The kind of toll tax, rental fees that the Pakistani system will gain is roughly $6-$8 billion a year,” Javaid, chief economist at the planning ministry, said in an interview.

“By 2020, I expect we will get this much momentum,” he added.

The economist said China has huge incentives to transport oil and other goods bound for its western regions through Pakistan as the Gwadar-Xinjiang corridor shaves some 15,000 km off other traditional routes.

It doesn't take long to imagine the savings on the many millions of litres of fuel, he said. Predicting future trade is, of course, an inexact science, as is predicting toll income, and Pakistan's ambitious targets could unravel if its improved security situation deteriorates.

Chinese officials have urged Pakistan to improve security, and Islamabad now restricts movement of foreigners to its vast western Baluchistan province that will host a key transport artery.

More from this category