Pakistan drowns in debt while losing its political and strategic autonomy to China
China with its Belt and Road Initiative is ensuring that Pakistan is submerged in a debt trap and is forced to part with its territories while losing strategic and political autonomy. Global media reports have indicated that China is unwilling to entertain Islamabad’s request to find the US$6.1 billion Main Line -1 (ML -1) railway project. This project is the biggest component of the Chinese flagship CPEC China-Pakistan Economic Corridor project at a 1% interest rate.
Pakistani debt trap connection to China
The ML -1 project has gone through a series of negotiation, renegotiation, suspension, and recommencement. In this scenario, Beijing is aware and considering Pakistan’s precarious financial state, that it cannot dictate the terms. Therefore, after posturing, the country will be pushed to accept the Chinese conditions whether the cost is political, economic, and strategic. Despite all assurances made by Beijing that everything is on track and they both countries are moving in tandem with the CPEC.
The reality seems to be quite different as work has only started on 32 projects out of 122. And China, on the other hand, continues under the name of CPEC to exploit both economically and strategically. With the most important rider being the Chinese companies, all entities involved will participate in the execution of these projects. The Institute of Policy Reforms, a think tank associated with the ruling party, Pakistan Tehreek-e-Insaf, has hinted that the country is already in a debt trap. It highlighted the country’s failure to bring reforms and fiscal restraint that has made the situation a national security concern.
Pakistan debt Statistics
According to reports of IPR and State Bank of Pakistan (SBP), Pakistan’s debt to GDP ratio currently stands at a shocking 107% of GDP. The Gross Public Debt of Pakistan had risen from 72% of GDP at $95 billion in 2018 to 87% at $112.8 billion in 2020. The total external debts and liabilities have risen from 33% of GDP (2018) to 45% (2020). The suspended International Monetary Fund loan of $6 billion is yet to be resumed due to Pakistan’s lack of economic reforms.