Observer Report
Beijing
“COVID-19 pandemic has caused a major, dramatic disruption in the global economy and Pakistan will also face severe consequences of an economic slowdown.
With this abrupt change in the economic environment, China-Pakistan Economic Corridor (CPEC) is even more crucial for Pakistan’s development than it was prior to the advent of COVID-19 early this year,” CEO of Karachi Education Initiative (KEI) Muneer Kamal said while talking to China Economic Net.
Muneer who is also former Chairman of Karachi Stock Exchange further said,
“Given a gloomy global economic environment in the foreseeable future, it would be difficult for Pakistan to attract foreign direct investment to develop its economic infrastructure.
In this very challenging environment, it is fortunate that large CPEC projects have and will continue to be implemented. The continuation of CPEC will counter some of the negative global investment environment”, Kamal said.
“The relationship with China has been and will remain unique and special for Pakistan. The importance of CPEC is magnified if we see regional dynamics and their impact on Pakistan’s economy”, Kamal added.
He explained that Pakistan’s trade and investment opportunities are limited with its immediate neighbors except for China. The current environment does not allow a healthy economic interaction with India, and sanctions imposed on Iran limit Pakistan’s trade with the Iranian market.
Continued instability in Afghanistan also leaves few good economic opportunities though recent developments are encouraging for better trade in the future. Fortunately for Pakistan, its key neighbour China is poised to become the largest economy in the world in a few decades.
“CPEC is a manifestation of almost six decades of extremely close relationship between China and Pakistan and China’s stunning economic growth. Since CPEC is a flagship project of Belt and Road Initiative (BRI), its success will be beneficial for both countries”, he added.
Responding to a question, Kamal said that one of the first signs of negative impact of COVID-19 was on Pakistan’s external account. Exports and remittances have already shown signs of weakness.
With a total debt of $110 billion (according to State Bank of Pakistan), $ 38 billion debt service (interest and principal) is required in the next three years. To meet these maturing obligations will be very challenging especially when Pakistan’s foreign currency sources are already under a lot of pressure.
It is with this background that Prime Minister Imran Khan in April this year made a plea to the developed world, particularly G-20, for a debt relief package for countries like Pakistan.
China fully supported this Debt Service Suspension Initiative for affected countries, and proposed to carry out specific work through bilateral consultations at the request of relevant borrowers.
So far the G-20 has responded positively to provide debt relief to Pakistan and other countries. China’s support has been greatly appreciated by Pakistan and the two sides will discuss for a possible debt relief on bilateral basis.
Apart from the bilateral negotiations on the debt deferment or rescheduling, Pakistan and China should keep a sharp focus on how to expedite CPEC projects and ensure these projects will be completed on time, he added.
