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The repayment enigma

2 23 18

The China-Pakistan Economic Corridor (CPEC) is being termed as a game-changer for the country. But is Pakistan fully equipped to repay the costs related to it?

CPEC, which started off as a $46 billion investment, is presently valued at a whooping $62 billion. This is almost double the aid Pakistan has received from the US in the last decade-and-a-half. The series of investments under the backdrop of CPEC are not confined to a single project but spread across multiple dimensions – including infrastructure, energy, water, safety and security etc. Undeniably, an investment of such a magnitude, which is set to connect China’s Kashgar to Pakistan’s Gwadar, certainly does not come without a cost.

Contrary to public opinion in Pakistan, CPEC is not a gift from China, but rather an investment from the Chinese perspective. And they will surely call for the repayment of this investment in the near future. A report by the International Monetary Fund (IMF) estimates that by the year 2023-24, Pakistan will have to pay approximately $3.5 billion to $4.5 billion per annum. This outflow of money is set to put additional pressure on Pakistan’s already stumbling Balance of Payment (BOP).

Pakistan has historically been struggling with a persisting deficit in the BOP, which is primarily made up of exports and imports of goods and services. Now the bigger question: is Pakistan equipped to sustain this colossal cost in the future? The answer can only come from analysing Pakistan’s exports potential.

Pakistan’s exports this year have shown a mammoth 13 percent growth $24.8 billion projection in 2017-18, against $21.9 billion in 2016-17), compared to the mere five percent........

© The News International