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State Bank on CPEC

Updated December 10, 2015

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SOME important remarks made by the State Bank governor, Ashraf Mahmood Wathra, about transparency in the China-Pakistan Economic Corridor projects deserve careful consideration.

In an interview given to Reuters, Mr Wathra said that “CPEC needs to be made more transparent”, going on to indicate that many crucial details of the various projects to be executed under the CPEC umbrella remain hidden even from him.

For example, he said that out of $46bn, he does not know “how much is debt, how much is equity and how much is in kind”. Details of this sort are important to know because they can help us understand the potential economic impact that CPEC will have in the future, given the many hopes attached to this project.

The State Bank has also repeatedly invoked the CPEC projects as the best hope for reviving growth in the country, but whether this is merely wishful thinking or a realistic expectation can only be determined if crucial financial details of the projects are known.

In a later clarification, the State Bank asserted that it remains positive about CPEC, but it stood by its transparency concerns.

Also read: Pakistan should be more transparent on $46bn China deal, SBP head says

The governor’s remarks are notable for a number of reasons. This is the first time that the need for greater transparency in CPEC has been mentioned from such an important platform as the State Bank.

Since the economy is faced with dwindling inflows of foreign investment and exports, it is crucial to know how its foreign exchange-earning capacity is going to shape up in the years to come, especially in light of the rising external debt burden that the government has been taking on.

Even though the government tells us that its plans to build industrial estates along the route of the road link from Gwadar to Khunjerab will help boost exports, Mr Wathra is entirely correct when he acknowledges this vision but adds that “we need to see this plan with more clarity”.

The CPEC project may indeed have tremendous potential for the country but only if it is implemented properly. By steadfastly refusing to share any of the crucial details of the various projects that make up the CPEC bouquet — even with stakeholders as important and central to its execution and impact as the State Bank — the government is not shoring up confidence in its capacity to oversee the implementation of such a large vision.

Published in Dawn, December 10th, 2015