LAHORE: A report from the Center for Global Development (CGD) regarding Belt Road initiative (BRI) has claimed Pakistan is the largest nation at risk from Chinese-led financing for these projects.
In its assessment, CGD said twenty-three countries faced the risk of debt distress out of 68 countries evaluated hosting BRI-funded projects.
The analysis said, “China’s track record managing debt distress has been problematic, and unlike the world’s other leading government creditors, China has not signed on to a binding set of rules of the road when it comes to avoiding unsustainable lending and addressing debt problems when they arise.”
Regarding Pakistan, CGD said “Through CPEC, Pakistan currently serves as a centrepiece for BRI. The total value of CPEC projects is currently estimated at $62 billion, with at least $33 billion of this amount expected to be invested in energy projects. China will reportedly finance roughly 80 percent of that amount. Yet despite this ambition, there have already been cancelled projects, most recently three major road projects at the end of 2017.”
“Adding to Pakistan’s risk of debt distress are the relatively high-interest rates being charged by China. Unlike the 2-2.5 percent “concessional rate” given to some China Exim Bank customers, reports indicate that some of Pakistan’s loans reflect rates as high as 5 percent.
The IMF notes that adverse shocks could lead to public debt ratios well above 70 percent. As a country that has requested six debt treatments from the Paris Club, Pakistan’s massive amount of borrowing from China raises concerns that it will need to return a seventh time,” the report read.
A co-author of the report and a senior fellow, Scott Morris at the Center for Global Development said, “Our research makes clear that China needs to adopt standards and improve its debt practices – and soon.”