BEIJING: China’s loans to Pakistan essentially aim to drive the country’seconomic development, and thus the loans must be offered in a way thataligns with the local economy and helps Islamabad boost manufacturing andexports, China’s leading newspaper Global Times said on Monday.
Pakistan expects to obtain $1 billion to $2 billion of fresh Chinese loansto help avoid a balance-of-payments crisis. “Some observers hope China’seconomic assistance will help the country avoid having to go to theInternational Monetary Fund (IMF) for a bailout, but the key issue is thesustainability of China’s financial help.”
China would not be stingy in offering help to Pakistan to strengthen itsinfrastructure, but China’s bank loan was a market-driven commercialdecision in line with international practices. “The main point isPakistan’s debt repayment ability.”
China-based financial organisations stick to a principle of not imposingadditional political conditions when providing loans to other countries,distinguishing them from most western financial institutions like the IMF.This could be one reason why Pakistan welcomes Chinese loans.
“China is likely to continue to finance new projects in the country butwill also assess their debt repayment ability to avert the risk of baddebt,” the article said.
The multi-billion dollar China-Pakistan Economic Corridor (CPEC) has begunto bring tangible benefits to Pakistan’s economy, which would likely boostPakistan’s debt repayment ability. “It is possible that we’re entering avirtuous cycle in which Chinese loans promote the development of the CPEC,and this then improves Pakistan’s debt repayment ability.” However, theSouth Asian country may need to propel economic reforms to ensure theeffectiveness of the loans and allow the local economy to benefit more fromCPEC projects.
It is hoped that people will learn a lesson from the IMF’s operations. In2013, the IMF approved a loan plan for Pakistan to support its programme tostabilise and rebuild the economy, but the multilateral lender failed tostrictly monitor the use of the loans, and in the end they did little forPakistan’s economic development.
Now the country’s economy is on an upswing with the help of Chinese loans.
Nadeem Javaid, who advises the prime minister and works closely on the CPECprogramme, was quoted for saying last year that debt repayments and profitrepatriation from CPEC projects will reach $1.5 billion to $1.9 billion in2019, rising to $3 billion to $3.5 billion by the following year.
China is likely to strengthen economic collaboration with Pakistan underthe CPEC program, in a bid to ensure the effectiveness of the loans. – APP