China’s investment under the corridor affected Pakistan’s ability to repay its debt

Islamabad. The International Monetary Fund (IMF) has given a big statement regarding the loan given to Pakistan. The IMF has said that at present the loans given to the Government of Pakistan are considered safe. But the debt to GDP ratio is not going to decline in the second half of 2022-23. Hence uncertainty has arisen. The International Monetary Fund (IMF) has again put Pakistan in trouble with the China-Pakistan Economic Corridor (CPEC). Even before this, the IMF has warned Pakistan about this project of China. Now in a recent analysis, it has said that the investment under CPEC in 2022 may increase economic growth rate in Pakistan, but at the same time it will create new challenges for Pakistan’s ability to repay its debt.

According to observers, given the dependence of Pakistan on the IMF at this time, it will not be possible for Shahbaz Sharif to reject the IMF’s advice outright. The IMF has released an analysis report about Pakistan’s ability to repay its public and domestic debt after it recently approved an installment of debt for Pakistan. It said- ‘Fresh investments have been made under CPEC in early 2022. Although this second phase of investment in infrastructure will improve the prospects for economic growth, but at the same time the debt burden will increase, due to which questions will be raised about the security of the loan given to Pakistan. The loans given are considered secured.

The reason for this is the strong policies of the Government of Pakistan and the prospects for better development. But the debt to GDP ratio is not going to decline in the second half of 2022-23. Hence uncertainty has arisen. At the end of the financial year 2020-21, the debt to GDP ratio of Pakistan was 77.9 percent. It is expected to grow to 78.9 per cent at the end of the financial year 2021-22. The IMF has said that if Pakistan properly implements the program suggested by it, then the ratio of its debt to GDP will come down to 60 percent by the end of 2026-27. According to the latest IMF report, China has 30 percent of the total debt on Pakistan.
In February this year, this share of China was only 27 percent. China’s debt to Pakistan has increased by $4.6 billion since February this year. Now the total debt of China has reached 25.1 billion dollars. The IMF has warned, ‘The economic growth is likely to decline further than expected due to high interest rates, policy tightening, increasing pressure on the currency exchange rate, the possibility of slowing economic growth in the medium-term and Chinese state-owned enterprises. The debt given to Pakistan appears to be at increased risk due to the burden of liability to Pakistan. Such debt-ridden countries have been under increased pressure from both sides, while they are not in a position to ignore any of them.