Magazine

Pakistan Following Sri Lanka’s Path Into Chinese Debt Trap: Report

Posted on the 18 June 2022 by Geetikamalik
Pakistan Following Lanka’s Path Into Chinese Debt Trap: Report

The fragile economy of Pakistan experienced another setback when it was recently China demanded a repayment, in November 2023, from USD 55.6 million for the Lahe Orange Line project, reported Italian publication Osservatorio Globalizzie.

Meanwhile, at the end of March, foreign exchange reserves held by Pakistani State Bank fell by USD 2,915 billion, due to external debt payments. Thus, Pakistan faces a gloomy economic future as far as relations with China.

Chinese company, China-Railway North Industries Corporation (CR-Norinco) which completed the Lahe Orange Line project in 2020 has demanded from the Punjab mass transit authority, an extraordinary amount of USD 45.3 million at the end of March 2023 and what remains is circulating from USD 10.5 million at the end of the year. CR-Norinco has insisted that all contributions were paid before the end of the contract on November 16, 2023, reported Osservatorio Globalizzohee.

China has made a difficult bargaining with Pakistan when it comes to loan returns and other investments in Pakistan. In the fiscal year 2021-2022, Pakistan paid around USD 150 million for interest to China because it used 4.5 billion Chinese trade financial facilities USD. In the 2019-2020 financial year, Pakistan paid USD 120 million for interest on a loan of USD 3 billion.

China's request for payment of the lahore pathway was carried out in the first week of April 2022 when a new political dispensation under Prime Minister Shehbaz Sharif had just stepped into the office. Previously, in early March 2022, China approved Pakistan's request to roll out a debt payment of USD 4.2 billion to provide great assistance for all the weather allies, Reporting Osservatorio Globalizzie.

China has been tight enough in recovering money from Pakistan. Take the Pakistani energy sector, for example, where Chinese investors repeatedly insist on solving problems related to existing project sponsors to attract new investments.

Some Chinese projects in Pakistan face problems in securing insurance for their loans in China because of the debt of the Circular of the Pakistani Energy Sector around 14 billion.

Pakistan must pay around 1.3 billion USD to Chinese electricity producers and so far only USD 280 million has been paid. Another example of hard negotiations by China through a monetary transaction of VIS-A-vis Pakistan is well documented in the case of the Dasu Dam project. Last year, China demanded USD 38 million against compensation for families 36 engineers who were killed in the terrorist attack of the Dasu Dam.

Compensation is made prerequisites for the start of work on the project. To calm China, Pakistan then agreed to pay USD 11.6 million as compensation.

While China is very responsible for Pakistani's debt issues, it is a mistake in handling Pakistan's economic by the government in a row that has caused the current deadlock.

Extensive loans taken from China, Saudi Arabia and Qatar and 13 loans from the IMF for more than 30 years (with most loan programs were canceled in the middle of the road due to failure to meet the loan requirements), is the main cause of economic decline.

IMF loans of 6 billion USD 2019 were also detained, and China has dealt with Pakistani requests that often help.


Back to Featured Articles on Logo Paperblog