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Birth of another dependency

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THE latest quarterly report from the State Bank of Pakistan may sound like a dry affair, but read it a little closely and you’ll notice some startling revelations.

For the past three years now we have grown accustomed to a steady drumbeat of positive news and statements about the economy — the reserves are rising, the circular debt has been contained for almost two years now, growth is ticking upward (even if very slowly), the fiscal deficit is coming down (targeted to hit 3.8pc of GDP this year, the lowest in over a decade).

For a couple of years now we have been told that the country’s macroeconomic fundamentals are stabilising and a new round of investment coming in from China is laying the groundwork for a new growth spurt that will last far into the future.

This story has not been without its skeptics. We have heard similar stories in the past too, only to watch the whole thing unravel very quickly.

The skeptics have pointed out that the rise in reserves owes mostly to declining oil prices and increasing foreign borrowing, and as such is not sustainable.

The continuous declines in exports, drying up of FDI are serious weaknesses, they maintain, and while remittances have shored up the external account, this could change given the fiscal difficulties of the GCC countries.

In short, they have argued that the government’s narrative of an improving economy is built on shaky ground.

Examine: CPEC: The devil is not in the details

The latest SBP report, although optimistic in its overall tone, points towards some changes in the first quarter of the current fiscal year that could lend lasting credence to the voice of the skeptics.

Even though the SBP has taken pains to avoid letting its assessment become fodder for the skeptics to beat the government with, the underlying facts are too stark to now paper over.


We seem to be substituting CSF inflows with commercial borrowings from China as a stopgap measure to plug our current account deficit.


Here are some noteworthy developments the report brings up on the external sector.

Pakistan saw net inflow of $1.1 billion in “net loan and FDI inflows from China in Q1-FY17” says the report.

Out of this, $700 million (the lion’s share of the total) was a commercial loan from the China Development Bank whose only purpose, apparently, was to help pay for the nearly $2bn of machinery that Pakistan imported from China in the same quarter.

In case you missed it, let me put it in plain English here: we’re borrowing money on commercial terms from a Chinese bank to pay for machinery imported from China under CPEC-related projects.

Elaborating on this, the report says “[w]hereas Q1-FY16 had seen a dramatic pick-up in net FDI from China, it was long-term loan disbursements that dominated in Q1-FY17.”

So last year in the same quarter, Pakistan saw net FDI inflow from China of $192m, but this year that figure dropped to $91m.

And loans from China in the first quarter last year were $138m, and this year they jumped to $979m, of which $700m was the commercial loan mentioned above.

These inflows helped cover up a hole that opened up in the country’s external account due to the drying up of Coalition Support Funds (CSF).

In the same quarter last year, Pakistan ran a current account deficit that was less than half of what it ran this year. Last year the CSF inflows played a big role in helping cover the gap.

This year the report says the commercial borrowing from China “helped to cover the increase in current account gap and lower foreign investment in the quarter”.

This is important for a couple of reasons.

First, we seem to be substituting CSF inflows with commercial borrowings from China as a stopgap measure to plug a running deficit in our current account.

CSF was always billed as a “reimbursement”, and booked in our accounts as an export of a service (an awkward classification for what it implies).

But the Chinese loans are on commercial terms and, unlike CSF, have to be repaid with interest.

Another reason is that our three main non debt creating sources of foreign exchange inflows — exports, remittances and FDI — all registered declines in this quarter.

For exports, this was the 10th consecutive quarter of declines that are now becoming alarming.

For remittances, it was the first quarter of decline since 2012, and the report warns that an uptick is unlikely in the foreseeable future.

So our current account is weakening almost irreversibly while imports from China are skyrocketing, and the gap is being plugged by commercial borrowing from Chinese banks.

“[T]he structural weaknesses in the external account — reflected by the continuous drop in exports, lower FDI, and the drop in remittances — present a challenge,” says the report.

How sustainable is this?

What are the terms on these loans, and what sort of outflows will be created when repayment begins?

Nobody knows, not even the State Bank it seems.

But noting the shifting gears in the economy, the report does point out that “in the short run, it is imperative that CPEC projects (both power and infrastructure-related) continue at their projected pace, mainly to ensure steady arrival of associated FX inflows from China.”

And then goes on to add that “[t]his financing will also be crucial to offset the rise in the import bill stemming from higher CPEC-related machinery imports.”

Is this a new relationship of dependency being built here?

Are we now getting locked into a cycle of borrowing and imports under the garb of CPEC even as the more important pillars of the external sector — exports, remittances and FDI — shrivel up?

If so, the first quarter of fiscal year 2017 will be the moment when the gears shifted.

Where these trends take us is difficult to foresee, but increasingly the government’s narrative of economic improvement is beginning to sound like a high-stakes bet instead of sound policy.

The writer is a member of staff.

khurram.husain@gmail.com

Twitter: @khurramhusain

Published in Dawn, January 5th, 2017



The views expressed by this writer and commenters below do not necessarily reflect the views and policies of the Dawn Media Group.


Comments (93) Closed



DKM Jan 05, 2017 05:11am

When the government do not disclose all the parameters of CPEC it creates doubts and if the doubt comes out to be correct it will be disastrous for the country and more so to its countrymen who have put so much hopes on it to change the lifestyle.

SHAH HUSSAIN Jan 05, 2017 05:51am

Nice and iformatove writeup.

Ukumar Jan 05, 2017 06:40am

Very smart analyses. I hope public is being educated and informed. Taking loan to pay interest is unsustainable.

Ps Jan 05, 2017 06:52am

Obviously nobody wants to read anything discomforting about China or CPEC

RAM Jan 05, 2017 07:05am

Similar stories what happned to Sri lanka and Banglades is being repeated.

Jawaid kamal Jan 05, 2017 08:03am

Thanks for the eye opener.

Truth Jan 05, 2017 08:54am

China has begun its first freight train service to London from Yiwu, a famed wholesale market town in the eastern province of Zhejiang. The train will travel for 18 days over more than 7,500 miles (12,000 km) to reach Britain from China. It will pass through Kazakhstan, Russia, Belarus, Poland, Germany, Belgium and France before arriving in London. So China does not need Pakistan to reach Europe.China will also not use Gwadar for oil transportation since transporting oil is cheaper by sea route to East China where major Chinese population and industries are located. How are we going to pay back the loans.

JS Jan 05, 2017 09:14am

To perpetuate this "economic recovery/cpec" nonsense, the only play is to hope this house of economic cards does not fall before the next elections.....

SATT Jan 05, 2017 09:22am

Don't worry still lot of things are in house for sale.

Iqbal Bhai Jan 05, 2017 10:00am

I agree to you on first 70% of your analysis. Government has misguided people by faking the macroeconomic indicators just like every other government has done so far. However, the example of buying Chinese Machinery with Chinese Loan is not a bad news. You will sell this machinery to CPEC which will bring you the money you have spent. The profit from selling the machine will hopefully be more than the interest payment on the loan.

wellwisher Jan 05, 2017 10:19am

story is same in India, will the author suggest some remedy

Ramachandran Kannan Jan 05, 2017 10:47am

@wellwisher What do you mean by same story ? India's borrowings as a sovereign nation are small relative to the size of the economy. Borrowings are by business houses from banks etc but this is a different subject. FDI inflow into India is strong.

Aftab Jan 05, 2017 10:50am

We always bet and then run here and there for a savior.

Aftab Jan 05, 2017 10:48am

@Truth Wht if Iran offers special discounts through Chabahar?

Shyam Jan 05, 2017 10:50am

One thing I dont get is Why should Pakistan is paying with borrowed money for a road with 90% use to export/Import from west China to Middle east and Africa. Are the Chinese going to pay tolls making it worth the investment and pollution? Have they agreed to transfer any technologies to help Pakistan develop its industrial base? Or is it nothing more than mortgaging country future for few to make money today?

Maleeha Jan 05, 2017 11:13am

we have to document our economy...We have to bring structural Reforms.. Bring 'those' in tax net, Increase exports, make industry competitive, Cut subsidies , Privatize companies which you cannot run without Injection of subsidies, and most important of al invest in knowledge based economy.

Ghaznavi Jan 05, 2017 11:19am

CPEC is a great project for Pakistan... Our Chinese brothers have graciously given us multi million dollar loans to fund the state of the art machinery we are importing from them. They are also graciously going to invest in CPEC so that we are able to pay the Chinese labourers generating employment for our beloved brothers. Through CPEC we are going to lay down the road so that our beloved brothers are able to transport goods to their markets in Africa. The infrastructure they are going to create will need electricity as well and for this they will construct power plants. We will graciously pay a set return on their investment in our motherland. This is a small price to pay for development... Long live Pakistan

Jayakarthik Jan 05, 2017 11:25am

@wellwisher I don't think story is similar isn't dial. No doubt exports have declined. India does not borrow to shore up its forex reserves.China is a shylock in a modern avatar.Pakistan is following the footsteps of Sri Lanka which also borrowed from China and regretting it.

Abhishek Jan 05, 2017 11:29am

@Ghaznavi It's difficult to tell if this is a sarcastic comment or a literal one. Such is the tragedy of some of CPEC discussions on this portal.

Tayyab Tariq Jan 05, 2017 11:31am

@Maleeha A wonderful remedy ... Even such a remedy will take time , around 4 - 5 years to reap the benefits !

Red Dawn Jan 05, 2017 11:36am

Please publish it in public interest: In pakistan, exports are being under invoices and exports over invoiced, to create a conduit of sophisticated mechanisms for transfer of wealth abroad (Its a modern and sophisticated source of transferring ill gotten money and called trade based money laundering). Pakistan has to curb on it. I think it can save upto 4-5 billion USD annually. Secondly, as for oil prices, their outlook for medium to long term is stable- especially due to solar energy attaining grid parity with oil. If at all, due to further expected price falls in solar energy, oil prices can go down, not up- Its further evidenced by oil rich gulf countries investing in solar energy (UAE) and privatization of oil companies (Saudi Aramco) to invest in alternative energies and use their proceeds to restructure their economy. All this indicates oil prices going down, not up.

Red Dawn Jan 05, 2017 11:38am

Also, Pakistan should use fuel for energy that it doesn't have to import. Like coal. Its $4 billion savings right there. Restructure the energy mix.

Adnan Jan 05, 2017 11:37am

It is a high stakes bet indeed, the bet being that CPEC projects will kickstart the economy into a high growth mode. It's a fair bet IMO. These numbers are worrying indeed but not much can be done in the face of falling export-competitiveness. There's only so much a govt. can do, businesses esp. those in textile sector are simply no longer competitive in global economy. Economy needs wholesale restructuring but there are no easy answers here.

Maleeha Jan 05, 2017 11:41am

@Tayyab Tariq but at some certain stage of time, we have to move towards this because ,it is solution. So why not have initiative now!

Nitin Saini Jan 05, 2017 11:43am

@Ghaznavi ahahha 1. take new loans to pay interests for old loans 2. oil and goods transport over sea is far cheaper that land transport. 3. CPEC is for the benefit of china not for pakistan and if all pakistanis don't think so, what's the point of all discussion with fools. 4. all projects have chinese labours, what is pakistan poor gaining for this if they are not getting work? 5. CPEC is strategic investment by china, incase malaca strait is blocked or south china sea has issue, china has a navy docl yard to break bloackage, get supplies from an alternative route. 6. China is using pakistan and if pakistan is fine with itself been sold as cheap comodity, what can we say.

AW Jan 05, 2017 11:44am

Thank you for realistic and accurate picture of our current national economic and financial affairs.

All of this is the result of decades of short term thinking and negligence in terms of lack of planning and absence of any sound as well as consistent economic policy and complex tax structure.

Successive governments have been either incompetent or blatantly insensitive to the long term financial stability of the country. Instead of building our own economy, the successive governments including the current government have chosen to fund expenses through heavy domestic and international borrowings without any regard to prioritization of expenditures in terms of ROI and without consideration to how the money is to be paid back with applicable interest.

While the irresponsible behavior continues unabated, public disclosures remain restricted to avoid scrutiny of the people whose future is being mortgaged without their consent.

Shubs Jan 05, 2017 11:47am

@wellwisher "story is same in India"

Can you please explain this amazing claim?

Adarsh singh Jan 05, 2017 11:54am

@wellwisher what are we selling?? rather we are buying oil and gas fields in diff countries,making chabhar strengthening north-south corridor in afghanistan.. the biggest loan for bullet train is on 0.1% that too has to be paid after 15 yrs/..

IB Jan 05, 2017 11:58am

wow what an achievement, thery are taking new loans to pay off old loans... shameful performance of NS and his team to increase loans by 3 times in just 3 years... half of them goes back in their pockets as kick backs from the new projects...

TBH Jan 05, 2017 12:00pm

China will find it much easier to do hars bargaining with pakistan as dependency is growing rapidly.

Abhik Jan 05, 2017 12:04pm

@Ghaznavi Too good..you have a great sense of humour

faisal Jan 05, 2017 12:06pm

Good, Nawaz sharif is doing wonderful job as PM. Kudos.

Amir Kamal Jan 05, 2017 12:08pm

"we’re borrowing money on commercial terms from a Chinese bank to pay for machinery imported from China under CPEC-related projects". This statement nails CPEC project, we are borrowing to make China rich, very bad for our future generations. The loan burden will be forced on our childrens.

Tayyab Tariq Jan 05, 2017 12:10pm

A wonderful article. If they will not take far sighted measures to improve foreign reserves, that would put a pressure on rupee value as our economy is import elastic. That would again result in an increase in imports in terms of dollar value creating a vicious circle of devaluation for rupee leading to a flood of inflation which would eat away people's purchasing power and curb economic growth.

Gknatarajan Jan 05, 2017 12:12pm

Good write up.present policy appears to be depend only on China from pins to rockets.and believe cepc is the only answer to all problems.spread the word game changer ?China only knows what is the game it is upto!

observer Jan 05, 2017 12:14pm

Net analysis - Whatever transit money Pakistan is going to get from China will go in paying the loans or even more than that. Not a rocket science here to guess who is going to gain and who is losing.

Mahmood Jan 05, 2017 12:28pm

In other words, we are able to borrow more and more, and sinking faster and faster into larger debt, that we will never be able to dig ourselves out of!

khan Jan 05, 2017 12:27pm

@Truth China is targeting GCC and Africa through CPEC. Access to Europe is on the plan of silk route. Importing oil from GCC through sea is expensive, longer route and risky due to south china sea conflict. CPEC is the win win situation for both countries beside Pakistan can fully leverage the opportunity.

Indian Jan 05, 2017 12:33pm

Does Pakistanis really believe that Loan can cover the gap instead of widening it?

Muhammad Qurban Jan 05, 2017 12:35pm

Mira Ghalib warned that borrowing to pay for good living would land you in deep trouble. We now seem to be unable to even negotiate terms of loans.

shahid Jan 05, 2017 12:39pm

Its not just the CPEC Chinese loans that are being used to buy Chinese machinery, the same rings true for money that came from other sources. Those who lend or grant money to Pakistan are very shrewd people, unlike our Dar sahab and babu's sitting in the Finance ministry. Take, for example, America. Between 2003 and 2012, there was a substantial inflow of dollars in the Pakistani coffers. But what a lot of people tend to miss is that quiet a substantial portion went back to American coffers. Where do you think the money for buying $5 billion worth of latest F-16's (Block 50/52) came from? Of course, it was the same American money that they gave to us for our 'services' rendered, and which conveniently went back to America to finance their jobs. So nobody should be surprised that the Chinese are doing the same. The problem is not what the Americans and the Chinese are doing to us, but rather the fact that our policymakers are idiots.

Skeptic Jan 05, 2017 12:41pm

In Accounting, this is called 'balancing the books' - by borrowing more to cover the deficit. Or you could simply cut the expenses too!? But expenses can be covered, if we just get a few billions every month from different sources.

Also, our PM needs to travel in style and has visions of very large projects ala, Dubai for Lahore and ISB - Metro, Motorways, Shopping Malls, Disneyland, Sports Arena, and others... So, after China, we will be looking to borrow from Mars.

Indian Jan 05, 2017 12:39pm

@Ghaznavi

We will graciously pay a set return on their investment in our motherland.

With 17% to 20% return even your enemies will be happy to invest in your motherland.

Ovais Jan 05, 2017 12:47pm

We pakistani are blinded by the PAK-CHINA friendship

In Washington's own words A passionate attachment of one Nation for another produces a variety of evils.

Sympathy for the favorite Nation, facilitating the illusion of an imaginary common interest, in cases where no real common interest exists, and infusing into one the enmities of the other, betrays the former into a participation in the quarrels and wars of the latter, without adequate inducement or justification.

And it gives to ambitious, corrupted, or deluded citizens, (who devote themselves to the favorite nation,) facility to betray or sacrifice the interests of their own country, without odium, sometimes even with popularity; gilding, with the appearances of a virtuous sense of obligation, a commendable deference for public opinion, or a laudable zeal for public good, the base or foolish compliances of ambition, corruption, or infatuation.

Thiru Jan 05, 2017 01:01pm

China and KSA will write off the loans in the fullness of time as they support Pakistan for its geographical position and loyalty.

Truth Jan 05, 2017 01:01pm

@khan Sorry, have to disagree. Importing of oil through sea is almost eight to ten times cheaper than land route. Please do some research. Oil need not to be transfer early because China has storage capacity of 3 months. So they will prefer to go by sea route. Yes, incase of conflict in South China sea they will use CPEC. But that is only incase of conflict.

Ron Jan 05, 2017 01:02pm

So basically China owns Pakistan now.

responsible Jan 05, 2017 01:14pm

We need information on PANAMA stories. These stories are fabricated by the government.

IND Jan 05, 2017 01:17pm

@Indian Sure, why not. ;-)

Just Someone Jan 05, 2017 01:22pm

"Increasingly the government’s narrative of economic improvement is beginning to sound like a high-stakes bet instead of sound policy" - Very Ture.

Alba Jan 05, 2017 01:41pm

The answer is simple. There is only one option other than increased foreign borrowing. Collect The Taxes !!! If any Pakistan government cannot do that then the growing population and the federal government are headed for a crash.

krishna Jan 05, 2017 01:48pm

@wellwisher : Can you elaborate ?

Amjad Jan 05, 2017 02:06pm

Nothing to worry,post CPEC, it is predicted that Pakistan will provide loans to Russia,IMF and World bank.

Dr Afridi Jan 05, 2017 02:09pm

Exports going down and FDI/remittances going down imply Pakistan isolating itself. Who cares, Nawaz packing his bags anyway... Pak economy is best if no people are involved, just set it to auto-pilot, but then politicians have to do solve problems...otherwise they have no business...

Amjad Jan 05, 2017 02:09pm

@Ghaznavi "This is a small price to pay for development"-Development of whom?China?

Masoud Jan 05, 2017 02:11pm

The finance minister looks so happy taking loan to pay loan, this arrangement will continue to to help NS government to shift burden only.

Sachin Jan 05, 2017 02:14pm

@Thiru Loyalty in international geo politics is a canine's game.

One commentator- Owais has written a fine piece about it. For a decade and half Pakistan was aligned to US. Now they have a new found friend. At least the Coalition Support Funds bore no interest. There is no grave danger to any nation than to bungle up its finances. Pledging alliances like what Pakistan does is not visible in the contemporary world. There are many influencers to this decision- the major one being to align with a Global power so that India is kept in check. The other is domestic economic conditions. The third- to be seen as a government which is actively pursuing investments- albeit this one comes with a cost. Every deal- the CSF or the CPEC has been wrapped by both powers as a bargain for a larger cause- earlier it was to fight terror (which was US's own interest) now the CPEC which is in effect a Chinese investment in a 'safe' territory that gives it labour, logistical advantages. Quite a risky game!

Hamid Jan 05, 2017 02:20pm

I don't see what the fuss is all about. I strongly urge everyone to dunk their head in the sand and ignore the propaganda from envious neighbours. After CPEC is finished, paying off these loans will be a breeze. In the interim period, while the CPEC activities are ramping up, our Chinese brothers will extend the payment schedule. 50-100B is nothing for a superpower like China and trust me, they will eventually write off all the loans - that's the kind of kinship we share. Long live Pakistan-China friendship!

NYPD Sympathy Jan 05, 2017 02:29pm

@Truth In case of conflict the pipelines , roads and railways will be destroyed by Indian Missiles . Pumping oil from Gwadar over 16000 feet in low temp over 12000 kms ? Joke , India has only to sabotage it , cheap at 1000 $ cost or one missile that too very short range and Kaput . Why di you think all these Agni tests are rattling Chinese media . They will rattle the CPEC too .

Mubashir Munir Jan 05, 2017 02:34pm

your comments are on the negative side please note that after the commissioning of coal power plants we shall be saving a lot as we shall be saving foreign exchange from running power plants on LNG and coal. We shall be saving a lot a shall be able to return our loans. We are still saving on electrical generation by going down of prices of petrol but the IPP mafia and our bureocrats did not give any relief to common man

Ahmad Jan 05, 2017 02:40pm

@Thiru You are utterly naive! No one writes off loans to others. So wake up and stop depending on others.

viv Jan 05, 2017 03:06pm

@MUBASHIR MUNIR if you mean running coal power plants with Thar coal to save import cost of coal, then it should be kept in mind that Thar coal is a B grade Lignite with low carbon content and high sulpher content. This feature makes it very expensive option for power generation except for mine-mouth projects. Also there is huge layer of brackish water which needs to be removed before extraction.The tariff approved for these projects under CPEC is around 9 cents per unit which is twice more than neighboring countries so there will be no savings.

Nasir S. Jan 05, 2017 03:31pm

Perhaps this explains why ate ruling elite habe properties and childten settled outside of the country. Any trouble and they can take a flight out and leave trouble free. Can we not see them planning for disaster. Not sure why they cannot do the same for the country.

BRS GouD Jan 05, 2017 03:36pm

Nice analysis..

Aly Alp-Ercelan Jan 05, 2017 03:51pm

and govt makes no projections of ecological damage by CPEC projects. the opposition does not care either.

peter Jan 05, 2017 04:17pm

It seems that Pakistani politicians have knowingly led the state to an economic servitude to china. Maybe they have thought that china will defend Pakistan to protect its economic interests. It seems to works in the short term (for now). what happens in the long term? we will have to wait and watch.

Its always the best to stand by your own feet. Not blaming but i think this is the ground reality.

ABE Jan 05, 2017 04:32pm

@peter - Good point, that no one seems to be considering. Over dependency on singular sources of funding, or sponsorship can lead to opportunities for blackmail and manipulation.

The loan-sharks in the old days, used to resort to very nefarious and creative ways to extract money from the debtor...The Chinese are not simply going to turn over and forget their investment. It comes at a price, which has yet to be realized fully. When the bills come due, and you can't pay, get ready for foreclosure, being kicked out of the house and on the streets!

khanm Jan 05, 2017 04:44pm

with enormous corruption all around us, when credibility has always been under question mark, where truth is never revealed or seldom told , every thing appears to be dubious...folks..When our politicians breaks in, the only thing you can do is believe it or not. YOu cannot ask for a receipt of the transaction or a sign for the dubious. politicians does not offer to cover your backside.

zeea Jan 05, 2017 05:08pm

Shame on our government and their policies, this is in itself ironical that you get loan from another country to shoulder previous debt and boast of ur success, wow.

Kalimullah Jan 05, 2017 05:48pm

@Truth World is not finish on Europe and we have Africa and middle east too and the easiest route is via Pakistan only. Don't spread wrong info

KDP Jan 05, 2017 07:21pm

It is time for all South Asian countries mainly India and Pakistan to mend fences and strengthen potential of our people who share social and genetical traits and thus not depend on foreign Chinese and/or Americans who have their own interest in mind rather than ours

Masood Hussain Jan 05, 2017 07:40pm

Inspite of doctoring the economy reports to give a healthy look it is on decline.

Shafiq Shah Jan 05, 2017 08:28pm

When you borrow on one credit card to pay back other credit card. You are certainly going bankrupt pretty soon. Bankruptcy is a total disaster.

Og Jan 05, 2017 08:42pm

Brave article. I wish you good life ahead. Take care

kumar Jan 05, 2017 09:54pm

@Ghaznavi ... this actually is the best comment, I've ever read on dawn, which I've been reading for a long time. And, this is my first comment on dawn. -from India

Zak Jan 05, 2017 10:27pm

While the writer has raised questions, the economic minister or his deputy should write in Dawn to answer this. A point to remember in the economic world is that time, cash flows, projects, long term benefits etc are all factors to be taken in. Once CPEC picks up, the inflows, electricity shortage the main cause of lower productivity and hence export , will be addressed. Better shipping docks, expertise in locally manufactured goods etc . It's a long road and a long journey and much to see and achieve, with ups and downs. But it is an exciting journey going so many places.

alla bux Jan 05, 2017 10:54pm

@Ghaznavi Finally a great comment. Keep it up.

alla bux Jan 05, 2017 11:04pm

"What are the terms on these loans, and what sort of outflows will be created when repayment begins?"

Why is this a secret? Does not the State Bank know what the interest rate is and when and how payments are to be structured? If so why do we need the Bank? Why not fire ALL its employees, close it and save some money.

Mangocaptain Jan 05, 2017 11:13pm

@shahid No it's totally different. China is giving loan where as US gave AID. Pakistan have to pay for the machinery loan which they are borrowing from Chinise Bank with Intrest.

Umar Khitab Jan 06, 2017 01:54am

I hope this time the accounting buff expert gets his rightful place in the central jail ...Enough of the lies and ridiculous fudged up financial numbers.

Malik Jan 06, 2017 03:26am

Divide and rule is live and kicking 100s of years after the brits used it, China wants to keep India and Pak fighting so they can dominate the sub continent and we just don't seem to see it.

As friends India and Pak will be a power that exceeds China which is what they cannot afford.

All the money we spend on the expensive killing gadgets can be used to feed our hungry people, build infrastructure and bring prosperity but we are still stuck with killing each other.

The writing's on the wall, lets be friends and show the world what brothers can do when they join hands and stop fighting.

ImInBeijing Jan 06, 2017 03:45am

Mr. Husain, I have read a number of your articles. I really don't understand why you are so pessimistic about CPEC. In my humble opinion it's the only hope that can break the downward spiral of Pakistan's economic and social development, caused by the spillover effects of America's invasion of Afghanistan. Pakistan is lagging behind neighboring India, that is very worrisome.

There is a great article by Dr. Ishrat Husain, the former Governor of the State Bank of Pakistan, titled "The economics of CPEC". I strongly recommend it to you. link is here: http://www.dawn.com/news/1305992

kuku Jan 06, 2017 05:15am

One big benefit for Pakistan that nobody talks about is that the greater the Chinese stake in Pakistan the lesser the chance of it breaking up or ravaged by insurgence or being attacked by Pakistan, China will not its investment be ruined and I think Pakistan is perfectly happy with it.

Both CSF and CEPC have saved Pakistan, talk about luck.

Puthomadre, karachi Jan 06, 2017 05:34am

This is very alarming they going to own us in the near future.

neal kluge Jan 06, 2017 06:19am

@Truth Islam does not allow loans.

J Jan 06, 2017 09:24am

The author raises perfectly valid points that the Pakistani government is mismanaging the economy. The fault is with Pakistan, not China. It is always hilarious to read comments from Indians who use the opportunity to trash China, CPEC and the China-Pakistan relationship.

Truth Jan 06, 2017 10:22am

@Kalimullah Economy of Africa is very small. Middle east is already in a mess.

shahid Jan 06, 2017 04:19pm

@Mangocaptain I agree. My main point, in comparing these two situations, was the way that foreigners get their money back cleverly,

Khan Jan 06, 2017 09:20pm

The $2 billion of imports was a one-off expense for machinery. We won't be importing so much every quarter. Exports have bottomed out too, and without electricity, there's no way to increase exports.

Shail Jan 07, 2017 05:36pm

@Ghaznavi No one is anyone's brother in international trade and politics. China is not Pakistan's, India is not Americans' and even Saudis will look after their own interests above anyone else's. My advice for what it is worth to Pakistan is to evaluate every project on its merits and not on brotherly love.

Annie Jan 08, 2017 09:55am

@J But they(Indians) do give sound logic for their criticism and solutions.

Annie Jan 08, 2017 09:58am

@J But they(Indians) do give sound logic for their criticism and solutions.

Thiru Jan 08, 2017 01:41pm

@Ahmad Pakistan is steadfast in its loyalty to China, even an emerging superpower needs friends and Chinese know that. Besides, you cannot extract more than what a population can afford to pay back without serious consequences.