ISLAMABAD – A Brokerage Topline Securities estimated that Pakistan needs toannually pay three to four billion dollars for a decade in loan repaymentsunder link>link>link>CPEClink> after the fiscal year of 2019/20.
Machinery imports are, however, decelerating as CPEC-related projects areprogressing to advance stage. China has remained a major thrust to foreigndirect investment into Pakistan as it accounted for more than half of$2.094 billion of FDI in the July-March period.
Nakao said China-Pakistan economic cooperation is very impressive and “ithas stabilised the macroeconomic indicators which have showed encouragingperformance during recent years”. “The IMF is assessing the economicoutlook of Pakistan and we will wait for the assessment and after that willsee how much budgetary support the country needs for an interim period.”
The Asian Development Bank (ADB) raised concern about the debt burden ofChina Pakistan Economic Corridor- (CPEC) led infrastructure projects onPakistan’s fragile finances.
“Countries should realise the economic viability of projects under belt androad initiatives,” Takehiko Nakao, ADB president told a news conference onday one of the ADB’s annual meeting.
“Sustainability, economic viability of such projects are difficult…investing borrowed money for infrastructure projects potentially pile updebt burden.”
Pakistan’s economy has seen growth accelerate in recent years but it hasnot been without problems. The economy witnessed over a decade-high growthof 5.3 percent during the last fiscal year and provisional 5.8 percent inthe current fiscal year ending June 30. Current account deficit swelled toan eight-year high of five percent of the GDP or $12.029 billion in thefirst nine months of the fiscal year 2018. Government estimated currentaccount deficit for the outgoing fiscal year at 4.4 percent or $13.7billion, while it set a target of 3.8 percent or $12.5 billion for the nextfiscal year.
The World Bank and the International Monetary Fund (IMF) have warned thatthe country’s macroeconomic picture has been deteriorating as its currentaccount deficit widens.
Foreign reserves have also been dwindling for the last couple of years amida spike in imports, including machinery for more than $50 billion worth oflink>link>link>CPEClink>projects. Machinery imports accountfor almost a quarter of annual import bills of $53 billion.
The IMF has projected Pakistan’s external debt and liabilities could peakto $144 billion in the next five years from $93 billion in the currentfinancial year of 2018. It also estimated that the country’s foreigncurrency reserves would continue to decline and could touch $7.075 billionby 2023 from $12.09 billion held by the State Bank of Pakistan.
More alarmingly, the total external debt servicing would reach $19.7billion by 2023 against $7.739 billion in the FY 2018. The foreign debtservicing is projected to rise from $7.7 billion to $19.7 billion,indicating immense pressure on the country’s external accounts.
ADB President further said the bank wants to collaborate with the AsianInfrastructure Investment Bank (AIIB) to meet the region’s growinginvestment needs and does not see the emerging China-led lender as a rival.
Nakao said although China is an important international lender andborrower, its rise and that of the AIIB would not be motivating factorsbehind any changes in the ADB’s future strategy. He said the twoinstitutions are different in many ways, which mean they could collaboratemore effectively.
“AIIB, it’s not the kind of threat to us,” he added. “We can cooperate withAIIB because we need larger investment in Asia and we can collaborate.”