While everyone is praising the CPEC’s role towards Pakistan’s future growth, no one is asking about the terms that Pakistan has agreed to with China as far as the working of the corridor and the repayment of the loans in this regard are concerned.
Beijing’s plan to invest billions of dollars in Pakistan’s broken economy has certainly drawn international community’s attention towards the country. Numbers of economic monitoring bodies have issued evaluations of Pakistan anticipated economic growth in the next few years. While Pakistan has huge potential for economic growth given the emerging new regional opportunities, challenges related to governance appear to trump Pakistan’s potential again with its leadership failing to come to terms with the high stakes involved.
By now it has become very clear that if Chinese investments go haywire due to our sustained flawed economic policies, Pakistan will be left with a much larger begging bowl as our national debt continues to pile bigger and bigger.
As the golden rule goes when the government’s failure is greater than market failure, economic policy is less likely to contribute to an improvement in welfare. In Pakistan, regardless of the marked inflow of foreign investment, lives of common citizens are not likely to get much uplift. The reason is simple: the current government’s economic policies are only suited to favor elite businesses. Besides, the rampant corruption, political infightings in the country and inefficient handling of billions of dollars worth loans have forced international lenders to question whether all of extravaganza surrounding the China Pakistan Economic Corridor (CPEC) can change Pakistan’s economic fate if the current policies continued to remain in place.
Much of the PML-N clamoring about taking the country’s federal reserve’s to a historic high, is build on borrowed money and loans rather than indigenous economic growth. The PML-N’s rhetoric of the economic reforms underway is as shady as its governance and other sectors.
While it’s encouraging to see number of international media outlets talking about the potential of Pakistan’s economy, what is worrying is this aspect: its one thing to talk about future economic potential and it’s another thing to actually harness that potential with result oriented and efficient economic policies. What is missing in the current government’s plan is the latter part.
While everyone is praising the CPEC’s role towards Pakistan’s future growth, no one is asking about the terms that Pakistan has agreed to with China as far as the working of the corridor and the repayment of the loans in this regard are concerned. Pakistan’s growing dependence on China can actually become a bigger challenge for the country: in the last couple of years, Pakistan has come to define its economy with China which means there is no alternative plan to revive the country’s economic future. While the terms of the loans offered to Pakistan under the CPEC are not public, it’s likely – as the IMF warns – that Pakistan will be returning those loans after the corridor starts generating revenues. Once the Chinese investors begin repatriating profits, “Pakistan will need to manage increasing CPEC-related outflows,” warns the IMF, adding that the amounts involved “could add up to a significant level given the magnitude of the FDI”
Certainly, Pakistan is at the crossroads and the country’s leadership cannot continue to make policies just to fulfill its political agendas which are only focused on warding off political opposition. Pakistan needs an economic “National Action Plan” to overcome its economic challenges; even the mighty China will step aside if Pakistan’s leadership continued to fail the country.
A few days ago, number of senators warned that CPEC could become an East India company for Pakistan if the current government failed from actively protecting Pakistan’s economic interests in the project which also involve checking and putting limits to Beijing’s involvement in the country’s economic and military spheres.
While CPEC offers a remarkable opportunity for the country’s economic growth in the long run, the government needs to focus on formulating policies that are independent of Chinese investment and can generate growth in the short run. As the IMF warns that, “Reaping the full potential benefits of CPEC will require forceful pro-growth and export-supporting reforms.” Moreover, the organisation further asserts that improved business climate, governance and security as necessary preconditions to enable CPEC investments to generate the resources required to cover their own associated outflows.
Besides China, Pakistan ties with all of its regional states have remained conflict oriented. With India openly lobbying to isolate Pakistan militarily and diplomatically, the leadership in Islamabad needs to revive its economic and diplomatic connectively with other states in the region, particularly with Iran and Afghanistan whose support and cooperation is essential for the success of the CPEC.
The IMF and other international lenders have continued to offer Pakistan loans besides the latter’s poor performance traditionally. The IMF is largely influenced by the US and if the latter was to put a hold on Pakistan’s aid programme it could have done easily and a long time ago. The aid packages have not stopped largely because no one in international community, particularly the USA, wants to see a nuclear state with population over 200 million people, to implode which will certainly have implications outside Pakistan’s borders.
Certainly, Pakistan is at the crossroads and the country’s leadership cannot continue to make policies just to fulfill its political agendas which are only focused on warding off political opposition. Pakistan needs an economic “National Action Plan” to overcome its economic challenges; even the mighty China will step aside if Pakistan’s leadership continued to fail the country.
