Much of Pakistan Prime Minister Imran Khan’s election campaign pledges were based on the promise of making a self-sufficient economy grounded on an Islamic welfare State model, and to lessen the debt burden of his country. However, now, Pakistan is facing the biggest economic crisis with its’ Rupee falling to a new low. After fiddling with the idea of imagining friendly countries (Saudi Arabia & China) as the saviours of her ailing economy, Pakistan has now officially started the procedure for another bailout from the International Monetary Fund (IMF). Beijing although hesitantly has endorsed the idea of the aid but with a bold caution to Pakistan indicating that the bailout ‘should not affect economic cooperation between the two countries’. But the US’s loud criticism of Chinese Belt and Road Initiative (BRI) as ‘debt-trap’ model of economic assistance is likely to influence the IMF bailout.
The China-Pakistan Economic Corridor (CPEC) has led to massive imports into Pakistan from China. Under CPEC China has promised Pakistan of several billion ‘underneath the guise of development in the energy, infrastructure and development sector’. But due to the ambiguity related to the projects, China has faced severing criticism from within as well as outside the country. For the time being no one has an idea of where the money is coming from, who is paying for the projects and, most importantly who is getting what in the whole project. Islamabad is aware of the fact that going for an IMF bailout is putting the economic relationship with China in focus. That is exactly what has happened; the US is keeping no stone unturned to link the prevailing financial ills of Pakistan with the Chinese infrastructure projects. According to them, the money coming from China has left Pakistan in a huge debt-trap leading to current account deficient. Many experts believe that the obscurity of the Chinese investment in Pakistan will be a huge hindrance when it comes to the next IMF bailout.
One of the conditions by IMF that might upset China is the transparency factor of the BRI. The IMF might press for transparency on the Chinese investments. This will be a huge blow to the secretive nature of the Chinese investments, as China like the idea of it that nobody knows how much they are making out of these projects, especially the CPEC. China has rubbished the claims that indicate Chinese investment as part of the problem of the ailing economy of Pakistan. Chinese foreign ministry spokesperson Lu Kang at his recent press briefing in Beijing has underlined that the ‘debt caused by CPEC makes a tiny part of the overall debt composition of Pakistan and therefore China should not be blamed for the financial problems of that country. CPEC is touted as the biggest infrastructure development project by China under BRI and by labelling the debt related to CPEC tiny, China cannot wash its hands on it, especially with no open book policy on the terms and conditions of the engagements.
It has to be noted that China is also a member of the IMF, and as a member, it has urged the IMF to make an objective evaluation of the Pakistani economic crisis, one based on ‘professionalism. But with US adamant with its view on BRI as part of China’s predatory economy and a debt trap policy, it will be a hard time for Pakistan on the road to the final bailout next month. Even if gets the $12 billion IMF bailout, analysts believe that the amount will not be sufficient to bridge the financial gap. Though the bailout might provide comfort to the economic stakeholders, helping it dodge the immediate danger of a ‘sovereign default’, but Pakistan will have to continue looking for more loans, and the cycle of debt trap will continue to haunt the country!
Script: Dr. Zainab Akhter, Strategic Analyst On Pakistan