Pakistan may not be able to pay back Chinese loans of $15 billion, says Wall Street Journal
Shares
NEW YORK, Jan 30 (APP): Pakistan will be able to handle repayment of Chinese soft loans to the government and businesses, which are part of more than $50 billion projects under the China-Pakistan Economic Corridor (CPEC), Planning and Development Minister Ahsan Iqbal has said.
"With 6 to 7 per cent growth Pakistan will be in a very comfortable position," Ahsan Iqbal said in an interview with The Wall Street Journal published on Monday.
"The bulk of investment coming into CPEC is private sector investment, foreign-direct-investment, so that's not going to disturb our debt-to-gross domestic product ratio."
Pakistan's government debt-to-GDP level is estimated to have risen
to 66.1 per cent last year from 64.2 percent in 2013, according to the International Monetary Fund.
The size of the Chinese-led investment projects has increased to about $55 billion from an initial $46 billion announced in 2015, the minister told the newspaper.
"It's part of an initiative the Chinese government calls 'One Belt, One Road' that aims to revive trade across Central Asia and into Europe via a network of railways, ports and highways," he added.
In November, AhsanIqbal, who is heading the investment plans in Pakistan, said about $11 billion of the loans had been allocated to infrastructure projects at about 2 per cent with payback in 20 years,
along with a five-year grace period.
The rest, he said, had been
earmarked for generating electricity, with about 11,000 megawatts
expected to be added by 2018 to end the nation's chronic power outages.
However, analysts, according to WSJ, have raised doubts about 'Pakistan's ability to finance repayments and repatriations if rising economic growth is not sustained and the government fails to reverse a drop in exports.
The government is targeting a growth rate of 5.7 per cent this year.
"The point is the borrowing becomes a curse when it goes into non-productive sectors, so this investment is going directly into sectors which are going to increase our growth potential," Ahsan
Iqbal was quoted as saying.
"The CPEC financing is actually addressing the big bottlenecks
of Pakistan's economy - energy and infrastructure."
"Repatriations related to power projects, however, could be substantial," he said. "Although the amount will depend on how much capacity actually comes online, servicing the power plants' loans
and profit repatriation could be significant - particularly in the
first few years, when firms repay the debt components of their
financing."
While Pakistan's debt sustainability has improved since Nawaz
Sharif came to power, its management could be better, Finance Minister
Ishaq Dar said in a statement on Saturday.
As regards the differences between Pakistan's four provinces over
the levels of Chinese investment each is receiving, Ahsan Iqbal said those issues had been resolved and all chief ministers were there in the latest Joint Cooperation Committee meeting in Beijing. "All provinces are happy and there is no dispute," he added.
