Pakistan should be more transparent on $46 billion China deal: SBP

Ashraf Mahmood Wathra questions how much of the $46 billion is debt, equity and kind

Reuters December 04, 2015
PHOTO: MYGANGAPUR.COM

KARACHI: Government needs to be more transparent about the details of energy and infrastructure deals worth $46 billion signed with China earlier this year, the governor of the State Bank of Pakistan told Reuters on Friday.

The deals, called the China-Pakistan Economic Corridor, should help shore up Pakistan's crumbling infrastructure and reduce its electricity shortages by building more power plants.

China will get a free trade zone in Pakistan's Gwadar port and access to the Indian Ocean.

New Pakistani roads will open up routes for Chinese goods into Europe and the Middle East.

SBP’s reserves rise to $14.787 billion

But the details, terms and financing of many of the deals remain unclear.

"CPEC needs to be more transparent," Ashraf Mahmood Wathra said.

"I don't know out of the $46 billion how much is debt, how much is equity and how much is in kind."

Pakistan, a nuclear-armed nation of 190 million people, has frequently struggled to manage its cash flows because the government is reluctant to tax the wealthy and powerful.

CPEC project: No chance of corruption, says Ahsan Iqbal

In September of 2013, Pakistan faced a balance of payments crisis, with just over $4 billion in foreign reserves held by the State Bank - less than a month of imports.

But since then, the state bank's reserves have recovered to $14.6 billion, with the help of an International Monetary Fund program agreed after Prime Minister Nawaz Sharif took power in 2013, a $1.5 billion gift from Saudi Arabia, an auction of telecommunications licenses and the issuing of a Euro bond.

Inflation dropped 2.73 per cent as oil prices in particular and commodity prices in general declined.

The rupee has stabilised at 105 to the U.S. dollar, although last month the IMF said it believes the rupee is over-valued.

Potential: CPEC to meet needs of people

Pakistan's economy grew 4.2 per cent this year, a slight improvement over the last year, and the country hopes to reach 4.5 to 5.0 per cent growth next year, Wathra said.

Yet underlying problems plaguing the economy, including daily power cuts and security problems, remain.

"Our long-term solutions lie in increasing exports and increasing FDI (foreign direct investment)," Wathra said.

"Without these two strong inflows, it is very difficult to keep the economy on track."

Foreign investment flows have been shrinking, falling by nearly a quarter this financial year compared with last year, and exporters say the energy crisis and an over-valued rupee is crippling business. ($1 = 105.3500 Pakistani rupees)

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COMMENTS (14)

faisal | 4 years ago | Reply | Recommend Paksitan is the only country in the world where the government undertakes one of the biggest projects in its history without revealing the details to the public. If someone is giving you loan at 18% rate of interest he is definitely not your friend. Pakistan government could have borrowed such amount directly at around 5-6% rate of interest and invested itself. But Chinese are giving money to us on loan- money that they will take back by awarding the projects to themselves. I fail to understand how it is an investment in Pakistan especially considering that what they are building will also be used by them only? So we give them land and pay them interest on the money that the Chinese have spent on themselves? What kind of gain is that? But we are too busy discussing islamic politics and consipracy theories to pay any heed to economics. Sad but true
Tommy Gunn | 4 years ago | Reply | Recommend The real beneficiaries of the CPEC would be the Chinese government, the Chinese companies involved in the project, the Chinese labor & the military & civilian establishments of Pakistan. The common people of Pakistan will be held with the bag, paying 18% return on $46 billion loan + difference in appreciation of US dollar.
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