ISLAMABAD - China is defending its billions of dollars of historic investment in Pakistan, dismissing allegations the economic development program is pushing the cash-strapped South Asia ally into a “Chinese debt trap.”
Visiting Chinese State Councilor and Foreign Minister Wang Yi made the remarks Saturday in Islamabad after talks with his Pakistani counterpart, Shah Mehmood Qureshi.
The massive bilateral program, known as the China-Pakistan Economic Corridor (CPEC), is the fastest-moving and flagship part of President Xi Jinping’s global Belt and Road Initiative (BRI).
The CPEC aims to construct and upgrade the transportation network, energy projects, a deep-water port at Gwadar and special economic zones to eventually support Pakistan’s industrial development as a manufacturing hub by 2030.
In the last four years, Wang said, the CPEC has brought about $19 billion in Chinese investment to Pakistan, and 22 “early harvest” projects have been or are being completed.
The Chinese foreign minister explained that 18 of the projects are financed through direct Chinese investment or with the Chinese assistance. He also rejected concerns about the transparency of CPEC projects
“Only four [projects] have been using concessional loans [of roughly $6 billion] from the Chinese side to make sure that CPEC has not inflicted a debt burden on Pakistan, rather when these projects get completed and enter into operation, they will unleash huge economic benefits ... and these will bring considerable returns to the Pakistani economy,” Wang said.
He noted the Chinese investment already has boosted Pakistan’s annual economic growth by between 1 percent to 2 percent, and it has created more than 70,000 jobs for Pakistanis. The power plants upgraded or built under CPEC have added about 12,000 megawatts of electricity to the national grid, effectively overcoming crippling outages
“These are real and tangible outcome. Our two sides have agreed that under the CPEC cooperation, the focus of cooperation will gradually shift to industrial cooperation and priority to help Pakistan develop local manufacturing, strengthen capacity for self-driven development,” said Wang.
Wang noted that 47 percent of Pakistan’s external debt comes from the International Monetary Fund (IMF) and the Asian Development Bank.
He shared the details apparently in response to U.S. criticism that Islamabad plans to seek a new IMF bailout package only to pay off Chinese lenders, assertions both Beijing and Islamabad rejected as unfounded.
Out of Pakistan’s more than $69 billion foreign debt, Beijing’s share is about $8.4 billion, including $6 billion in CPEC loans, according to figures Pakistani Finance Minister Asad Umar shared with the parliament earlier this month.
Pakistan is paying two percent interest on CPEC loans until they are completed, according to Pakistani and Chinese officials. The total interest due by 2022 will be about $1 billion, they say.
Islamabad is facing a debt crisis and Finance Minister Umar recently told the parliament the government would decide by the end of September whether or not it will require an IMF bailout program.
Wang arrived in Pakistan just a few days after U.S. Secretary of State Mike Pompeo visited the country to hold the first official talks with Prime Minister Imran Khan’s government to try to reset bilateral ties that have plunged to their lowest point over the past year.
While Islamabad’s ties with Washington have deteriorated, Beijing has deepened bilateral economic and military relations with its South Asian partner.
Wang’s delegation also is scheduled to meet with Khan and army chief, General Qamar Javed Bajwa, during his three-day official visit, the first since the new Pakistani government has assumed the office.
Pakistan’s tensions with the U.S. stem from allegations the country is harboring terrorist sanctuaries used for attacks against American and local forces in neighboring Afghanistan - charges Pakistani officials reject.
Foreign Minister Wang reiterated Beijing’s unwavering support for Islamabad’s counterterrorism efforts, and he welcomed the recent U.S. engagement with Pakistan.
“China also supports the U.S. in developing a mutually beneficial relationship with Pakistan on a basis of mutual respect. We believe China and the United States and the wider international community should support the new Pakistani government in delivering governance.”