Islamabad [Pakistan], November 3 (ANI): In the quest for strengthening the economy and infrastructure, the weak and developing countries are moving toward China’s debt trap. The example ranges from Sri Lanka to Pakistan to Kenya, according to Daily Times.
Pakistan, which is struggling with debt, high inflation, a spike in unemployment, and a lot of other macroeconomic problems, seems to be going on Srilanka’s way. Like Sri Lanka, which is currently in throes of a vicious economic meltdown, Pakistan had also engaged with Chinese projects which may be a strong ally in the region that Islamabad needs for both its sustained economic gains and political stability but the newspaper believe that necessary measures may be taken to avoid the country going Colombo’s way.
Sri Lanka could be a great example for other countries to save themselves from China’s ambitious project. In a debt/equity swap, Sri Lanka has transferred the Hambantota port, and power plant and may transfer the airport to Chinese control because it is unable to pay off its debts. Additionally, debt service consumes 90 per cent of Sri Lanka’s revenue. Another example could be Venezuela, where China made the largest investment of any single country so far, investing $52 billion from 2008 to 2014, Daily Times reported.
Pakistan’s total debt is close to USD 72 billion or close to 70 per cent of GDP, and the current account deficit has increased by close to 120 per cent. With the Chinese silk road project, the interest will be in the range of seven per cent, payable in 25 to 40 years, and Pakistan will be required to pay roughly seven to eight billion dollars as EMI for the ensuing 43 years, beginning in 2018 and so on. It appears impossible for the nation to pay back both the principal amount and such a hefty interest rate.
This is not the case only in Sri Lanka and Pakistan, but the same thing is seen in African countries. Sub-Saharan Africa’s public debt has increased from 34 per cent in 2013 to 53 per cent in 2017. A major portion of Kenya’s USD 36.4 billion worth of external debt (as on June 2022) is from China. Kenya has already paid USD 972.7 million on Chinese debt so far and Kenya’s treasury projects and debt repayments to the Exim bank of China will raise to USD 800 million in the next financial year. Kenya’s auditor general recently issued a warning that if the country defaults on loans from the China Exim Bank, it runs the risk of losing control of Mombasa port. The terms of a USD 2.3 billion loan for Kenya Railways Corporation specify that the port’s assets are collateral, and due to a waiver in the contract, they are not protected by Kenya’s sovereign immunity. China has provided 30 per cent of Ethiopia’s total new public external debt over the past five years and China’s Exim bank has recently refused to release USD 339 million meant for Ethiopia’s infrastructure projects, reported Daily Times.
Obviously, the Chinese silk road project is a colossal entity in the region, where China has been investing in the infrastructure sector of Pakistan, but still, some measures may be taken to avoid Pakistan going Srilanka’s way. The latest developments have not only transmuted the region, generating a pool of jobs for locals but also purportedly offer long-term sustainable economic gains. However, the situation didn’t go well with Gwadar in Balochistan as the residents including local fishermen purveying the marine resources had been at risk of losing their livelihood because of Chinese investment in the region. Moreover, the locals had not been provided with a substitute for their loss of profession. The recalcitrant behavior of locals is justified at their end but there’s another side of the coin, which is more striking.
To resolve Pakistan’s monetary issues, the public authority ought to reconsider settling the economy in a manner that wouldn’t reserve its gains and political uprisings don’t plunge into societal strife. In essence, Pakistan’s economic recovery and stability can only be sustained with the support of a broader dialogue and citizen engagement. While projecting the bigger picture, one cannot deviate from the fact that China is one strong ally in the region that Pakistan needs for both its sustained economic gains and political stability, but the foreign affairs echelons also bear the responsibility to generate a wide range of regional investors to help mitigate the eminent effect of the debt trap, on the same patterns, which resulted in the downfall of Sri Lanka.
This requires a cohesive national economic approach to set the patterns, which allows Pakistan to engage with more than one economic partner. The Shanghai Corporation Organization is also one such platform that safely vouches for its members the opportunity to engage in enhanced cooperation, which Pakistan must seek. Missing out on the opportunity for Russian oil and Iranian gas would be a blunder. The potential to explore the enhanced trade routes with its neighbors would also be a good direction to help alleviate the poor conditions at ground level. Eventually, it’s a matter of national interest, and Pakistan shall take effective corrective measures to evade this precarious debt trap economic situation, reported Daily Times. (ANI)
This report is filed by ANI news service. TheNewsMill holds no responsibility for this content.