As the newly elected prime minister- Imran Khan- takes charge of the country, the economy and public finance of Pakistan is in shambles. The central bank of the country has 10 billion dollars foreign exchange reserve with which imports of only two months could be supported. For the last four years, the imports of the country have far exceeded the exports and this resulted in the Balance of Payments (BoP) crisis. The reason behind the exponential growth in imports is the China Pakistan Economic Corridor (CPEC). Now it is left with going to IMF for bailout or to China for support, the IMF is not likely to provide bailout due to opposition from member countries like the United States. A group of United State senators have maintained that Pakistan is at risk of debt distress.
According to an ANI report, U.S. senators David A Perdue, Patrick Leahy and 14 other have written to Secretary of State Michael R. Pompeo and Secretary of Treasury Steven T. Mnuchin while expressing concern over bailout applications by countries that fall in China’s debt trap.
The senators in their letter said, “This financial crisis illustrates the dangers of China’s debt-trap diplomacy and its Belt and Road Initiative (BRI) to developing countries, as well as the national security threat they pose to the United States.”
According to Centre for Global Development, out of 68 countries which are currently hosting BRI-funded projects 23 countries are at risk of debt distress. Senators by giving an example of Sri Lanka said, “It is also found that Chinese behavior as a creditor has not been subject to the disciplines and standards that other major sovereigns and other multilateral creditors have adopted collectively, and in the process, debt levels and dependence on China are rising.” IMF promised a bailout of 1.5 billion to Sri Lanka in 2016. Last year, Sri Lankan government gave Hambantota Port on lease to a Chinese state company after it failed to repay debt of $1 billion.
Concerns of U.S senators are right. China is doing to Pakistan what East India Company did to Indian sub-continent. Not just with Pakistan but with all other countries that rely on Chinese investment for development works in their countries. Pakistan which never kept economic and social progress in mind is trapped in a debt crisis and is totally at the mercy of Chinese. In the fiscal year 2017-18, Pakistan received $4.5 billion worth of loans from China apart from $ 1.5 billion trade facility. In the preceding year, China had extended $ 3.9 billion worth of loans. Therefore, in the garb of CPEC China has been doling out loans to the Islamic nation and has been crippling its sovereignty.
For more details: China is doing to Pakistan what East India Company did to Indian sub-continent
No relief for Pakistan coming from anywhere. Very recently, US Defense Department announced that it has suspended $300 million in aid to Islamabad over its failure to take any sort of actions against the terrorists. This is not the first time that US has cancelled financial aid to Pakistan. In his first tweet of 2018, president Trump had slammed the terrorist nation saying that it had rewarded the U.S. aid with “nothing but lies and deceit”. This was followed by a punitive aid cut by the Trump administration against the US. It was reported that there was a 62 per cent decline in security aid from the US to Pakistan over last five years according to data released by the US Congressional Research Service (CRS). Nikki Haley, US Ambassador to the United Nations then confirmed that Trump administration has withheld $255 million in security aid for Pakistan. Similarly, economic and humanitarian aid to the country declined 77 percent from $1.1 billion in financial year 2012 to $246 million in financial year 2016. The US budget this year also displayed this tendency of the US administration. The overall assistance to Pakistan was “down about $10 million” to $351 million.
India and other neighbours will thankfully benefit from all these aid cuts as they will likely have fewer issues at hand to deal with related to terrorism. But the problem will arise for the newly elected Pakistan PM Imran Khan. Now it will be interesting to see what would be the next step of Imran Khan in order to provide relief to his debt ridden terrorist nation.