Pakistan Prime Minister Shehbaz Sharif is now headed for Beijing (China) on a five-day visit on June 4 to meet top Chinese leaders. The official line adopted by the Pakistan government is that the trip is meant to strengthen bilateral relations. The reality may be something very different from the window dressing being done for public consumption.
The Pakistani public is being told that the visit will help fast-track many China-Pakistan Economic Corridor (CPEC) projects and re-launch them. Let some facts regarding CPEC and the liabilities it has created for Pakistan speak for themselves. Over a decade ago in 2013, the elder Sharif, Mian Nawaz Sharif, was in power. At that time, Pakistan’s external debt stood at $60 billion. In 2024, when the younger Sharif is the PM, the external debt has more than doubled to over $124 billion.
A decade ago, when the CPEC projects started, the Pakistan government claimed that over 20 lakh jobs will be generated in Pakistan. However, recent data shows that barely 2.5 lakh jobs have been created so far in these projects. Is CPEC only a chimera the Chinese have sold to gullible Pakistan governments?
Of the external debt of $124 billion, around one-fourth (25 per cent) of the debts, $30 billion plus, are owed by Pakistan to China alone. The ally that Pakistan never tires of speaking in glowing terms is thus the biggest lender of all. A significant portion of this debt is on account of CPEC projects as their total value is put at $62 billion. Servicing the Chinese debt is no easy task for Pakistan and Sharif is visiting China to explore face-saving ways to stop accumulating more debts. The strengthening of ties with China is just another name being given to begging the Chinese to restructure their loans.
China seems to have reached the end of its tether as far as more investments in Pakistan are concerned. For too long, and too many times, China has given debt rollovers to Pakistan and one for $2 billion was given barely a couple of months ago. The Chinese have now started asking as to how many more rollovers will Pakistan need and for how long? The Chinese investors, be it private or government entities, want their investments back but they don’t see it happening in a hurry.
Repeated IMF loans
Between 1958 and 2024, Pakistan has gone to International Monetary Fund (IMF) for bailout packages 24 times. Even at present, it is waiting for a word from the IMF bosses to get more loans and for a long period. Some Pakistani newspapers have mentioned that the Sharif government wants a loan of around $9 billion and for three years. Interestingly, the reports have neither been confirmed nor denied.
The quantum of IMF loans to Pakistan stands at more than $7.72 billion and its appetite for debt funds is unlimited as is clear from the paragraph above. Given Pakistan’s critical dependence on IMF for avoiding sovereign default, the lender has a lot of leverage in terms of policy decisions. One thing that is talked about in hushed tones in Islamabad is that the IMF does not want any of its loan amount to be used for debt servicing of the Chinese loans.
This is a red herring, both for China and Pakistan, and neither has spoken officially about the IMF putting any conditions regarding Chinese loans. Repeated rollovers from China, coupled with those from Saudi Arabia and United Arab Emirates (UAE) has saved Pakistan from going under. However, debt rollovers don’t mean their size grows smaller as interest accumulation only worsens things in the long term.
