CPEC transparency

Updated October 13, 2018

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A MOMENT of truth seems to be rapidly approaching for the PTI government. The managing director of the International Monetary Fund said clearly that the fund will expect “absolute transparency about the nature, size, and terms of the debt that is bearing on a particular country”, and although she did not explicitly mention China in her remarks, they were given directly in response to a question about Pakistan’s stockpile of Chinese debt.

The transparency must extend to “the extent and composition of that debt,” she added, whether it was government-owned or by state-owned enterprises “or the like of it”, which presumably means it also includes private-sector debt.

The government representatives enjoy giving the figure of $95 billion as the total size of Pakistan’s external debt in their public remarks in an attempt to impress upon us all the sheer size of the debt mountain they have inherited.

Since this figure includes bank borrowing and other private-sector debt, we can see this repeated mention of it as a sign that all debt, whether private or public, has a bearing on Pakistan’s external debt sustainability.

If the IMF indeed insists on disclosure of the “extent and composition” of all debt, including CPEC related, then the government has an obligation to ensure that such details are also shared with parliament and the State Bank of Pakistan. The government and the IMF cannot keep the details of these future liabilities, that have a direct bearing on the country’s external debt sustainability, as a private matter purely between themselves.

At the moment, even the State Bank does not have these details and has to compile its own debt sustainability forecasts on the basis of whatever open information there is, meaning the curator of the country’s foreign exchange reserves is left to draw external debt sustainability forecasts on the basis of informed guesswork.

Even the payment mechanism involved in the Chinese projects were not known to the State Bank, resulting in a significant under-reporting of imports from China because many of the payments were not routed through this country’s banking system.

The PTI leadership, while in opposition, made strong demands for full disclosure of all CPEC deals, as well as the LNG deal.

In their early days in power they repeated their commitment to follow through on their promise to disclose both of these. But today they are backtracking from this commitment.

If their hands are tied through legal covenants that prohibit disclosure, then surely these also apply to the sharing of such details with the IMF.

It would be unacceptable to have a situation where the government and the IMF are both in on the details of these important deals, while the people of Pakistan and the State Bank are left to guess what the future holds for them.

Published in Dawn, October 13th, 2018