Pakistan following Sri Lanka’s path to find itself in Chinese debt trap: Italian publication
Rome/Islamabad: An Italian publication has revealed that Pakistan, which has also been combating an economic crisis, is following the same path as Sri Lanka which will eventually lead the country to fall into the Chinese debt trap.
Pakistan’s already fragile economy suffered another setback when recently China demanded repayment, by November 2023, of USD 55.6 million for the Lahore Orange Line Project, reported Italian publication Osservatorio Globalizzazione as quoted by ANI.
The Chinese company, China-Railway North Industries Corporation (CR-NORINCO) which completed the Lahore Orange Line Project in 2020 has demanded from the Punjab Mass Transit Authority, an outstanding sum of USD 45.3 million by the end of March 2023 and the remaining outstanding of USD 10.5 million by the end of the year.
CR-NORINCO has insisted that all dues be repaid before the expiry of the contract on 16 November 2023, reported Osservatorio Globalizzazione.
China has made a hard bargain with Pakistan when it comes to paybacks on its loans and other investments in Pakistan. In the fiscal year 2021-2022, Pakistan paid around USD 150 million towards interest to China for using a USD 4.5 billion Chinese trade finance facility. In the financial year 2019-2020, Pakistan paid USD 120 million towards interest on USD 3 billion in loans.
The Chinese demand for the Lahore Line payment was made in the first week of April 2022 when the new political dispensation under PM Shehbaz Sharif had just stepped into office.
Earlier, at the beginning of March 2022, China acceded to Pakistan’s request to roll over a whopping USD 4.2 billion debt repayment to provide a major relief for its all-weather ally, Osservatorio Globalizzazione reported.
The publication mentioned that China has been quite stringent in recovering money from Pakistan.
While China is heavily responsible for Pakistan’s debt problem, it is the mishandling of Pakistan’s economy by successive governments that has led to the current impasse, reports the publication as quoted by ANI.
Extensive loans taken from China, Saudi Arabia and Qatar as well as 13 loans from the IMF over 30 years (with most loan programmes called off mid-way for failure to fulfil loan conditions), is a major cause for the economic downturn.
The 2019 USD 6 billion IMF loan is also on hold, and China has dealt with Pakistan’s frequent requests to help. Ironically, Pakistan on its part is not shy of playing the loan addict.
This strategy has not paid the dividends and is only making Pakistan sink deeper into debt. Pakistan must be closely watching developments in Sri Lanka, for it could be the next nation to face the consequences of bad economic policies and heavy debt burdens, reported Osservatorio Globalizzazione.