CPEC to enable Pakistan to break debt shackles through wealth creation

By Misbah Saba Malik | Xinhua Oct 8, 2021

by Misbah Saba Malik

ISLAMABAD, Oct. 7 (Xinhua) -- The China-Pakistan Economic Corridor (CPEC) has time and again been targeted by some Western media and think-tanks as a "debt trap" for Pakistan, but the situation on the ground bears witness that it is enabling the country to break the shackles of the Western loans through wealth creation.

Pakistani experts and officials believe that the "debt trap" rhetoric is highly miscalculated and a futile attempt to play down the benefits the CPEC is bringing to Pakistan.

Addressing a press conference here on Wednesday, the country's Minister for Planning, Development and Special Initiatives Asad Umar said the world's eyes are fixed on the CPEC, and some forces in the world do not want to see it succeed so they try to malign it through negative propaganda as being "non-transparent, having debts of high interest rates and being a threat to Pakistan's debt sustainability."

Contrary to the false propaganda, the CPEC is very transparent, and it is being monitored by both houses of Pakistan's parliament, Umar said, adding that the details of the power plant projects under the CPEC are also accessible to everyone on the website of the National Electric Power Regulatory Authority.

Negating a recent report by a U.S. research lab regarding the high interest rates of CPEC loans, Umar said that both the Pakistani government and the private sector borrowed loans for CPEC power projects, adding that the interest rate for state-owned projects' loan was an average of 2.4 percent while the interest rate for the private sector is not high either.

"China also provided grants to Pakistan including a recently completed vocational training institute in Gwadar, and the Gwadar airport, Gwadar hospital, etc., and interest-free loans for infrastructure network in Gwadar. If the grant and these loans are added, then the net effective rate of interest on CPEC infrastructure projects is about 1.98 percent," he added.

Umar said that even the Chinese loans to the private sector of Pakistan are cheaper compared to other international lenders including the Asian Development Bank.

Talking about the challenge of debt sustainability his country is facing, Umar said it is a big challenge on which the current government is working, but the challenge has nothing to do with Chinese loans.

"Chinese debt is about 10 percent of Pakistan's total loan, and 26 percent of the total external debts. So how can it (the U.S. research lab) say that this 26 percent is a threat to Pakistan's debt sustainability and not the other 74 percent which Pakistan owes to Western lenders?" he added.

In a conversation with Xinhua, Inam-ul-Haque, a political sociologist, said that the CPEC has the potential to remove the financial woes of Pakistan because it set the solid base of industrialization by fulfilling the country's demand for electricity, besides setting up an effective road infrastructure.

The CPEC has the potential to break the begging bowl of Pakistan by enabling it to create enough wealth for domestic use and debt servicing, he said, adding that Pakistan recently witnessed a historic surge in exports and its major credit goes to CPEC power plants for their uninterrupted power supply to the industry.

"What distinguishes CPEC loans from Western loans is that the CPEC and its projects focus on socio-economic development of underprivileged people and areas of Pakistan. For example, the CPEC's western route will not only create jobs for the people of the underdeveloped area but also give them access to big markets through which their economic condition will get better," he added.

Unlike Western loans with a high interest rate and other conditions, Chinese loans are fairly concessional and devoid of any arm-twisting, aiming to uplift the Pakistani economy.

In a talk with Xinhua, Syed Hasan Javed, director of the Chinese Studies Center, School of Social Sciences and Humanities at the National University of Sciences and Technology, said that Pakistan was suffering up to 18 hours of power outage a day before China stepped forward to help address the country's energy woes.

"The offer to invest in Pakistan's energy sector was open for all, but at that time no one except China dared to support the country that was marred by terrorism, whose foreign investment had dried up, and whose economic activities were being crippled by energy shortages and infrastructure gaps."

He added that the West did not invest in Pakistan at that time and after a few years when Chinese power plants successfully addressed the electricity shortage of Pakistan, it started negative propaganda after missing the boat.

Khalid Mansoor, special assistant to the Pakistani Prime Minister on CPEC Affairs, told media on Wednesday at the press conference that, unlike Western propaganda, the CPEC is playing a big role in the country's economic development by setting the base for industrialization and creating jobs during the construction and operations phase of infrastructure and energy projects.

"Now in industrialization and agricultural phase, not only exports will be enhanced but the bulk of jobs will be created for Pakistanis," Mansoor said.

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