THE success of the BRF and International Cooperation 2023 and Xi’s eight action plans have given a “new hope” of quick global economic recovery through a just international cooperation, economic globalization, modernization, openness and last but not the least digitalization. It seems that the “Geo-economic” of the BRI and CPEC have flustered the western policy makers who have been banking on their hidden geopolitical agenda to sabotage the BRI & CPEC caravans of progress, prosperity, elimination of poverty and eradication of unemployment in the world.
The AidData, a research institute at William and Mary University in the US has once again published a report indicating so-called abnormal increase in the Chinese debt producing strains in the financial health of Pakistan’s economy. AidData calculated Pakistan’s cumulative public debt exposure to China at $67.2 billion for the period from 2000 to 2021. That surpasses the $46 billion recorded for the same period in the World Bank’s International Debt Statistics, based on voluntary disclosures from Pakistan. Frankly speaking, the loans under the flagship of the CPEC do not have any specific socio-economic, geopolitical or geostrategic condition. It is absolutely open, transparent, inclusive, development, human and prosperity-oriented which is commendable. On the contrary, even basic principles of genuine research methods, accounting modules and financial management practices have not been properly followed and intentionally selected data is slanted against China used in this report. Moreover, it is primarily based on presumptions, self-inserted parameters, self-defined procedures and self-centered policies and unidentified sources of information to tarnish Chinese regional and global investment especially under the BRI & CPEC.
According to report, Pakistan is home to the $50 billion China-Pakistan Economic Corridor (CPEC), a flagship BRI project, is a prime example of so-called debt trap. It is the third-largest recipient of Chinese loans, after Russia and Venezuela, the data shows. It is absolutely “incorrect” and “untrue”. The Federal Finance Ministry, the SBP, SECP and many other official regulatory authorities have already “negated” the western fabricated stance about so-called surge in the Chinese debts in the country. It is crystal clear that CPEC loans are divided in government to government loans, investment and grants. Infrastructure sector is being developed through interest-free or government concessional loans.
Energy projects are being implemented under Independent Power Producers (IPPs) mode and finances are mainly taken by the private companies from China Development Bank and China Exim Bank against their own balance sheets, therefore, any debt would be borne by the Chinese investors instead of any obligation on part of the Pakistani government. Pakistan has opted for Chinese investment under CPEC due to the favorable financing arrangements. China stepped forward to support Pakistan’s development at a time when foreign investment had dried up, and economic activities were being crippled by energy shortages and infrastructure gaps.
CPEC is not imposing any immediate burden with respect to loans repayment and energy sector outflows. CPEC outflows started from the year 2021 and spread over 20 to 25 years. The resultant benefits of these investments to the Pakistan economy would far outweigh these outflows. Furthermore, the said report could not adopt even basic laws of financial accounting, manuals of credit management, SPOS of financial management, misinterpretation of state’s sovereign guarantees, misperception of international law and last but not the least, basic procedures of mutual exchange, discussion, ratification and finalization of any MOU/agreement/contract was ill connived.
The authors of this so-called research report could not establish any direct correlation between the two independent variables and deliberately associate different causes of default, meltdown of economies, political instability and social disharmony with Chinese loans which is not true. According to the World Bank report (2019) social welfare development from the CPEC Phase-II would increase by 10.51 percent. Consequently, it will also help lift 1.1 million people out of extreme poverty. It has also potential to boost the employment opportunities and Pakistan may get four million new jobs. Trade will also witness an increase of 9.8 percent, if Pakistan implements the CPEC and support it by required reforms.
Interestingly, the composition of the Chinese loans are long term with easy conditions of repayments, rescheduling and restructuring with lowest interest rate which shows its strong political commitment to rescue Pakistan and its declining economy from recession and stagnation. Furthermore, according to many published reports of the State Bank of Pakistan, SECP and Finance Ministry Pakistan is not a high risk to the Chinese loans which clearly negates the false, fake, fictional and fabricated propaganda of the western media outlets terming it as unproductive creating strains of the overall financial health and credibility of the country.
The methodology for measuring such debt is a matter of some serious debate. The AidData report calculates public and publicly guaranteed debt (PPG), including loans for which the central government or its agencies are liable for repayment. The research lab used what it calls Tracking Underreported Financial Flows (TUFF) methodology, drawing on 147,703 sources in more than a dozen languages. According to many regional financial gurus and economist AidData uses a broader-than-usual definition of PPG debt, resulting in larger figures for some countries.
In summary, CPEC is a matter of the country’s future socio-economic prosperity, energy up-gradation, massive industrialization, green energy, eradication of poverty, generation of new jobs, immense social development, agricultural revolution and last but not the least, greater regional connectivity. The said report is factually incorrect and manipulated especially erroneously reported the potential impact of Chinese loans for the power and transport infrastructure on Pakistan’s economy. The so-called tall claim of this report is sub-standard, factious and fictional. On the contrary, the CPEC projects of energy and transportation are contributing to the macro-economy of the country. Both have immense socio-economic multiplier effects.
Critical analysis of this much propagated and widely circulated report reveals that it is full of human/technical/professional errors, distortions, confusing concepts, misinterpretation, self-defined economic theories, self-inserted accounting parameters, untrue self-assumptions and intentional deviation from the basic concept of research methodologies and professional neutrality. Chinese loans are not rich countries specific to so-called grab resources, but the reality is that most of China’s foreign aid flows to the least developed countries, and many of the BRI recipient countries are resource-poor economies.
—The writer is Executive Director, Centre for South Asia & International Studies, Islamabad, regional expert China, BRI & CPEC & senior analyst, world affairs, Pakistan Observer.
Email: [email protected]
views expressed are writer’s own.
