Introduced under considerable fanfare in 2015, CPEC provides much-needed financing for infrastructure and energy pipelines that Pakistan could not entice other investors to underwrite. However, the expected payoff is unlikely to compensate for the sizable risks to which these investments expose the Pakistani economy.
Grappling with a crippling economic crisis at home, Pakistan is compelled to tread slowly and carefully in the emerging geoeconomics and politics of the region. Although financial help and support from China, Saudi Arabia and the UAE have contributed to partially resolving the country’s balance of payments crisis, yet an IMF bailout seems inevitable. Some would translate it as a return to old partners in the West — or the US to be more precise.
In the past, English was the sole language of upward mobility in Pakistan, both a relic of British colonial rule and a means of accessing Western markets, educational institutions, and jobs. Now, Mandarin has become the “hot new trend,” said Abbas, the Mandarin instructor in Gilgit…In Pakistan, the growth in Mandarin-language learning has been fuelled by direct funding from the Chinese and Pakistani governments, as well as a mushrooming cottage industry of private teachers and institutes claiming to provide “the Chinese edge.”
Pakistan’s new government has been in a mad dash to attract foreign aid and investment—most notably from Saudi Arabia—to offset a widening current account deficit, rising foreign debt repayment obligations, and avert a balance of payments crisis. Pakistan’s external financing needs will approach or exceed $30 billion this fiscal year.
The fact is that China has grown strong and rich by flouting international trade rules. But now its chickens are coming home to roost, with a growing number of countries imposing antidumping or punitive duties on Chinese goods. And as countries worry about China bending them to its will by luring them into debt traps, it is no longer smooth sailing for the BRI.
China has urged Pakistan to help maintain mutual trust and ensure the smooth development of the China-Pakistan Economic Corridor, a project that has been criticised in the South Asian nation for the levels of debt it has incurred as a result.
Are America and Pakistan finally breaking up? The short answer is no. As much as both states are fed up with each other, they remain far too co-dependent to simply walk away. What we are seeing instead is a tough and protracted re-negotiation over the terms of the relationship. The question of Pakistan’s role in Afghanistan is not necessarily the hardest issue…The far bigger question… is what India and Pakistan’s role will be in the emerging cold war between the US and China.
China’s growing involvement in Afghanistan may also create tensions in the Sino-Pak relationship. Here’s the thing: China’s main goal in Afghanistan is ostensibly to keep the East Turkestan Islamic Movement (ETIM) out, while Pakistan’s is to keep India out.
Pakistan’s freshly minted Prime Minister Imran Khan has an unusual opportunity. If he plays his cards right, he can keep his rivals, including his controversial predecessor Nawaz Sharif, tied in knots for a long time. Or he can duck the bouncer, and play the game as it has been played, ensuring that Pakistan remains a client state, although of a different master—China.
Some in Pakistan have speculated that China may oppose an IMF program out of concerns that it would compel China to release the financing terms of many CPEC projects. But outside of situations where external debt restructuring is required, it would be exceedingly unusual for the IMF to make such a demand. Instead, the IMF would likely require confidential data on debt payment schedules and other financial information necessary to understand Pakistan’s full balance of payments situation.
