China is withdrawing from funding the Belt and Road Initiative due to Pakistan’s growing debt

Representative image | Photo credit: PTI

Islamabad, Pakistan: Beijing is withdrawing from Pakistan’s $ 60 billion commitment to the global Belt and Road Initiative (BRI), the Asia Times reported.

“The future of the CPEC is not only clouded by China’s seemingly more conservative new lending policy, but also by Pakistan’s over-indebtedness, which is rapidly pushing the country into a debt crisis. Pakistan’s debt-to-GDP ratio is now at a high 107% of GDP, “FM Shakil said in his article.

Pakistan has slipped into the debt trap due to the government’s failure to reform and weak fiscal management.

Recent media reports, citing data compiled by researchers from Boston University in the United States, noted that overall loans from the state-backed China Development Bank and Export-Import Bank of China fell from a peak of $ 75 billion in 2016 for only 4 dollars. billion last year. According to Asia Times, provisional figures for 2020 show that the amount shrank to about $ 3 billion in 2020.

FM Shakil, writing for Asia Times, attributed Beijing’s trade war with the United States and corruption of Chinese companies involved in the CPEC as the main reason for the drying up of funds in the China-Pakistan Economic Corridor (CPEC) project.

Several BIS-related projects are now stalled or are behind schedule due to lack of funding. Of the 122 CPEC projects announced, only 32 were completed in the third quarter of this fiscal year, according to Asia Times.

The author said that, under the CPEC commitments by China, he had to build eight special economic zones (SEZs) in four provinces of Pakistan.

Excluding the Gwadar area, the industrial city of Allama Iqbal in Punjab and the Rashakai economic zone in the Khyber Pakhtunkhwa province, the other seven SEZs are still in the pre-feasibility or post-feasibility phase with no tangible development on the ground, according to Asia Times.

The author of the article said that China was reluctant to invite non-Chinese companies to invest in SEZs, but that changed with the funding dried up.

Beijing mainly agreed to allow Pakistan to form a new joint venture mechanism with companies other than Chinese state-owned or private enterprises to spur the progress of the CPEC project, including a multi-billion dollar railway upgrade, said a source located in the Pakistani Ministry of Planning in Asia Times on condition of anonymity.

This is why Pakistani Railways (PR) have globally advertised the opening of tenders to modernize their rail system.

In order to overcome Beijing’s reluctance to fund the CPEC, Pakistan has tabled a bill in parliament to retain the army and take near-total control of the CPEC.

It aims to reassure Beijing that their investments will be safer amid attacks on Chinese engineers and others facilitating infrastructure projects, FM Shakil said.

Meanwhile, the Baluchi have intensified their attacks on CPEC projects and the Chinese citizens who work there, increasing the security costs and political risks of the projects.

Shakil said Islamabad’s move to give the military more control over the plan is a clear attempt to mitigate China’s growing security concerns.

Begun in 2013, BRI is Xi Jinping’s grand plan to connect Asia with Africa and Europe via land and sea trade networks to create new routes to China.