How Chinese loans trapped Pakistan's economy – DW – 08/02/2024
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As Pakistan works on enacting economic reforms under a new multibillion-dollar IMF bailout, Islamabad must first figure out what to do with its mountain of debt owed to China.

As Pakistan works on enacting economic reforms under a new multibillion-dollar IMF bailout, Islamabad must first figure out what to do with its mountain of debt owed to China.

After cash-strapped Pakistan secured a new $7 billion (€6.5 billion) bailout package from the International Monetary Fund (IMF) in July, Islamabad has started talks with Beijing on reprofiling billions in Chinese debt as it seeks to enact economic reforms.

On the table are proposals to delay at least $16 billion in energy sector debt to China, along with extending the term of a $4 billion cash loan facility due to depleting foreign exchange reserves.

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Analysts say that the CPEC loans were initially presented as the cheapest option for international loans, but it later emerged that they would be far more expensive to pay back than expected.

“The agreements, heavily favoring China, were poorly negotiated, resulting in the project being over-promised and under-delivered. The public and media were misled by the then minister of planning and his team to portray CPEC as a significant economic game-changer for Pakistan and the region,” Khalid said.

  • Buffalox@lemmy.worldEnglish
    64·
    5 months ago

    Are you sure this is actually the goal?
    Aid to developing countries from the west does not have a very good track record either.
    Obviously if China can build the economies of those countries, it would benefit China in the long run, while controlling an economy that runs at a deficit is not that attractive.
    You may be right, but I’m just not sure it really makes as much sense as many people seem to believe.

    • Eldritch@lemmy.worldEnglish
      142·
      5 months ago

      Are you sure this is actually the goal? Aid to developing countries from the west does not have a very good track record either.

      Yes, there’s ample evidence of it. Actually aid wise the US has been rather decent. The Marshal plan etc has a pretty good track record. That said the US absolutely does meddle too much in the governance of many countries. Though generally those countries don’t get much aid to speak of. Either way it doesn’t matter. I never mentioned the United states. Even if the United States was worse at it. That doesn’t make China doing it right.

      Obviously if China can build the economies of those countries, it would benefit China in the long run, while controlling an economy that runs at a deficit is not that attractive.

      That specifically isn’t what China is doing. If they were pulling from the local populace, hiring people to hekp with the building and construction. That would be one thing. What they’re doing is using this to prop up their own economy. Bringing along Chinese workers. Building this for the countries and charging them for it. They will get to use it some. But more than anything it’s used to expand the Chinese economy. Not build other local economies. Outside of consumerism that is.

      Controlling economies that operate at a deficit is very desirable for china. They want the resources located in many of these countries. What better way to get it than to have an in or to control the local government? If it didn’t make sense, the United States wouldn’t be trying to feel similar functions through different methods. It’s a form of soft power which is usually some of the best power. You don’t have to send people to war and kill people to get things done. It’s why corporations try to trap people in debt as well.