LAHORE: A report from the Center for Global Development (CGD) regardingBelt Road initiative (BRI) has claimed Pakistan is the largest nation atrisk from Chinese-led financing for these projects.
In its assessment, CGD said twenty-three countries faced the risk of debtdistress out of 68 countries evaluated hosting BRI-funded projects.
The analysis said, “China’s track record managing debt distress has beenproblematic, and unlike the world’s other leading government creditors,China has not signed on to a binding set of rules of the road when it comesto avoiding unsustainable lending and addressing debt problems when theyarise.”
Regarding Pakistan, CGD said “Through CPEC, Pakistan currently serves as acentrepiece for BRI. The total value of CPEC projects is currentlyestimated at $62 billion, with at least $33 billion of this amount expectedto be invested in energy projects. China will reportedly finance roughly 80percent of that amount. Yet despite this ambition, there have already beencancelled projects, most recently three major road projects at the end of2017.”
“Adding to Pakistan’s risk of debt distress are the relativelyhigh-interest rates being charged by China. Unlike the 2-2.5 percent“concessional rate” given to some China Exim Bank customers, reportsindicate that some of Pakistan’s loans reflect rates as high as 5 percent.
The IMF notes that adverse shocks could lead to public debt ratios wellabove 70 percent. As a country that has requested six debt treatments fromthe Paris Club, Pakistan’s massive amount of borrowing from China raisesconcerns that it will need to return a seventh time,” the report read.
A co-author of the report and a senior fellow, Scott Morris at the Centerfor Global Development said, “Our research makes clear that China needs toadopt standards and improve its debt practices – and soon.”