China Pakistan Economic Corridor (CPEC) is a project between China and Pakistan aiming to connect Western China with the Indian Ocean.
As per the Forbes Magazine, CPEC will bring economic growth and prosperity in Pakistan, creating many jobs for the people of the country. But at what cost?
As the costs of the projects are increasing day by day, corruption is also rising and Pakistan’s debt to China is getting higher.
Pakistan is not just indebted to China. Government debt, external debt, and internal crisis can create a critical situation in the country. As per Trading economics.com in the fourth quarter of 2017, Pakistan’s current account deficit recorded was of 3867 USD million
From 1976 to 2017, Pakistan’s current account averaged -587.18 USD million. It reached a record high in the third quarter of 2002, 1418 USD million and in the second quarter of 2017 it reached a record low to -4419 USD million.
In 2017, Pakistan’s government debt is equivalent to 67.20% of country’s GDP. Pakistan’s government debt to Gross Domestic Product from 1994 to 2017 averaged 69.30%. It reached a record high in 2001 to 87.90% and record low to 56.40% in 2007.
Coming to the external debt of Pakistan, it went record high in Q4 of 2017 reaching 88891 USD million from 85052 USD million in Q3 of 2017. In 2002 the external debt of Pakistan was 53029.34 USD Million and then by end of 2017, it was 88891 USD million.
Furthermore, the currency reserves and foreign capital flow in Pakistan is just going down. It seems likely that Pakistan will have to reschedule its procedure and timing of paying back debt to China.
Chances are that if Pakistan is unable to pay the debt to China, it will be replaced with equity, thus giving China control over CPEC. The similar situation was faced by Sri Lankan government. They paid their debt to China by giving their Hambantota port to China for 99 years.
Similar to CPEC project, the Hambantota port expansion began in Sri Lanka with the help from China through loans. When the time for payback came and Sri Lanka was unable to pay its debt, Beijing took the loans in form of equity. In a very subtle manner, Beijing turned Sri Lanka into a semi-colony.
So can we expect the same situation in Pakistan? When Pakistan will be unable to pay its debts, chances are that China will take it back in terms of equity. Slowly & gradually taking control of CPEC completely, thus taking control over Pakistan.