Chinese investments may hurt rather than help Pakistan, say IMF think tanks

3deffect

Regular Member
Joined
Mar 28, 2016
Messages
471
Likes
543
Country flag
7_img161116224056.jpg


  • Think tanks have warned that Chinese investments will not boost Pak economy
  • IMF has said CPEC has raised Pak capital account deficit to seriously high levels
  • China is also taking major risk of alienating India which is uneasy about the project
Two international think tanks have warned that Chinese investments in Pakistan will not boost the domestic economy. Instead, it will push Islamabad towards a major debt problem. This comes after the International Monetary Fund recently said that the Beijing-funded China Pakistan Economic Corridor (CPEC) has raised Pakistan capital account deficit to seriously high levels.

"In conclusion, the CPEC is unlikely to be a game changer for Pakistan's economy," London-based Capital Economics said in a recent report. "Given the poor prospects of reforms in the rest of the economy, we expect growth will be average around 4.5 per cent over the next decade, which is little changed from its performance over the past 10 years."

China is also taking the major risk of alienating India, which is uneasy about the project, the Washington-based Peterson Institute of International Economics said in a recent report. It said India might also try to create problems for the project, but did not explain how it will do that.

"China risks upsetting India with CPEC for several reasons, the most prominent being that some infrastructure projects will run through Pakistan-controlled Kashmir, the land India claims as its own. Moreover, CPEC's upgrades of the Gwadar port have created fears the facilities may one day be used to serve the Chinese navy. For these reasons, India could try to place roadblocks in CPEC's path".

Almost every day, Pakistani officials have been promising an amazing economic turnaround+ with the help of the $44 billion economic corridor, which is being financed and constructed by Chinese companies. The project helped bail out Pakistan's prime Minister Nawaz Shariff from a difficult situation last year when he faced growing criticism over power outages across the country. Nearly 80 per cent of the project funds have been allocated for electricity generation with the promise of producing a colossal $16,000 mw by 2030.

Some Pakistani experts and politicians have raised questions+ if the project was worthwhile as it would bind the country is a major debt wrap. Pakistan will bear heavy cost for machinery used in the project as most of it would be imported from overseas sources, Capital Economics said. CPEC has 8,000 Chinese workers who are likely to remit a major part of their incomes back home.

"What's more, since it will be Chinese companies running many of the new power stations, the income from selling the electricity generated will flow out of Pakistan," Oliver Jones, the researcher for Capital Economics said.

Though newspaper headlines in Pakistan proclaim the short-term benefits out of construction activity in the project, Jones is pessimistic about it.

"The short-term boost from construction is unlikely to be as much as the headline figures imply, and in any case there are big doubts the projects will be delivered on the scale that is planned," he said.

The IMF raised serious concerns saying that the project will push up Pakistan's current account deficit to 1.5 per cent of GDP next year. Medium-to-long term issues like increasing capital outflows "could arise from CPEC-related repayment obligations and profit repatriation," the IMF said in its final review of its three-year loan to the country.
http://www.defencenews.in/article/C...than-help-Pakistan,-say-IMF-think-tanks-39037
 

Mikesingh

Professional
Joined
Sep 7, 2015
Messages
6,931
Likes
26,580
Country flag
I've been saying this all along! For eg the cost of electricity to Paki consumers will go through the roof from Rs 7 at present to Rs 18 - 21 per unit and about Rs 25 for commercial use as the Chinese companies will have to pay back their lending banks with interest! Can the Paki industry afford this? They'll collapse!

Then the cost of transportation of Paki low value goods (basically textiles) will be more than the cost of production itself (Road transport is 7 to 10 times costlier than transporting the same stuff by sea). So whither the CPEC motorways? It's basically for use by the Chinese who have taken the Porkis for a jolly good ride!

Chinese companies are dumping their coal fired plants - 11 of them - into Pakistan as part of the CPEC and themselves turning to renewable sources of energy like solar and nuclear power. The Pakis are gonna get chocked with the resultant pollution and worn out equipment! Their maintenance will cost the Moon! Who's going to foot the bill?
 

aditya10r

Mera Bharat mahan
Senior Member
Joined
Mar 19, 2016
Messages
5,699
Likes
11,437
Country flag
yeh toh sala hona hi tha............................................................
 

3deffect

Regular Member
Joined
Mar 28, 2016
Messages
471
Likes
543
Country flag
dont forget CPEC is game changer..change the game from begger to slaver..(Game of throne HORDOR)
 

Hari Sud

Senior Member
Joined
Mar 31, 2012
Messages
1,856
Likes
2,677
Country flag
Balance of payments will be the Biggest curse for Pakistan. Previously, US was kind to it but not anymore. Moreover Chinese will demand cash or stop any future supplies. Real delima for Pakistan.
 

Srinivas_K

Senior Member
Joined
Jun 17, 2009
Messages
6,062
Likes
7,321
Country flag
The Chinese bullied Sri Lankan government and got their air port and sea port because Sri Lankan govt could not pay the dues.

Chinese mean bussiness , they will not waive any of their loans.
 

Latest Replies

Global Defence

Articles

Top