New Delhi, Feb 26 China Pakistan Economic Corridor (CPEC) started in 2013, with $62 billion spent to date. But now debt-ridden Pakistan is casting around for loans to pay older loans.
The "unbreakable bonds" of Pak-China friendship are under stress, Pakistani nuclear physicist and activist Pervez Hoodbhoy wrote in Dawn.
"China is probably guilty of short-selling us - most IPP deals are considered a scam. So are tax exemptions to Chinese companies. Duty-free imports from China have driven many local manufacturers to bankruptcy. But it was our trumpet blowers who sold to us the nonsense of CPEC as a Marshall Plan for Pakistan. Europe was ruined by war, but Pakistan fell on its knees because of its own doing," he said.
According to IMF data, China holds roughly $30bn of Pakistan's $126bn total external foreign debt. This is thrice its IMF debt ($7.8bn) and exceeds its borrowings from the World Bank and Asian Development Bank combined, Hoodbhoy said.
"So why is mighty China awaiting the green signal from American-led IMF before releasing some relief? Shouldn't it at least reschedule Pakistan's debt? Or, better, wipe it off? Let's face it: these are naive hopes. Chinese capitalism - like any other capitalism - is about profit, not philanthropy, he added.
Chinese companies, state or private, are like other companies. Being under their government's instructions to view Pakistan as a strategic ally, they understand Gwadar gives entry to the warm waters of the Persian Gulf - those which allegedly attracted USSR into invading Afghanistan. But they tread cautiously; Pakistan is not the world's best place to park your capital, Hoodbhoy said.
CPEC was built around a fatally flawed premise. It presumed that infrastructure - roads, bridges and electricity - alone will create growth and jobs. This is like assuming abundant water, soil, and fertiliser will yield a rich harvest. But the crucial input is seed - human capital. And here's where things went awry, he said.
As talk turns towards debt traps and comparisons with Sri Lanka, anxiety and anger is growing.
Pakistan and China have reached a deal for a $700 million commercial loan, reviving prospects for a total of $2 billion injection from the friendly country a move that might temporarily stabilise the extremely thin foreign currency reserves until the International Monetary Fund (IMF) money started pouring in, The Express Tribune reported.
The development came days before Pakistan was scheduled to return another $300 million Chinese commercial loan.
The agreement for the $700 million loan between Pakistan and the China Development Bank was reached at the weekend.
Pakistan had also paid back a total of $1.3 billion for two commercial loans to the ICBC over two months ago in the hope of receiving back the money immediately.
However, the ICBC did not refinance the two separate facilities $800 million and $500 million which contributed to a significant reduction in the country's foreign exchange reserves.
This time, the Chinese commercial banks took a longer time in finalising the new agreements because of certain complexities involved in these transactions and the bilateral relations, Express Tribune reported.
It is now expected that the ICBC would reimburse one loan this month and the second one in March.
Pakistan's gross official foreign exchange reserves stood at $3.2 billion as of last week, which may plunge further in the absence of any new foreign loan.
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