Unenviable conditions

Islamabad finds itself in a tight spot given its alarmingly low level of foreign exchange reserves and the pressure it faces to balance books as well as retire foreign and local debt within unforgiving deadlines. The picture is not pretty when it comes to harnessing the revenue-generating sources. Exports are not showing any signs of a significant boost and are, by and large, stuck at the level they have been for years. The situation is further compounded by the ever-sharpening competition local exporters face in international markets from regional rivals.

The mainstay of Pakistani exports are textiles and, although a European Union initiative known as GSP-Plus gave this sector a much-needed shot in the arm, they are still hobbled by rising cost of production and a cut-throat competition from regional challengers ever so eager to capture its share in the lucrative US and European markets. Other major contributors of revenue such as remittances sent by overseas Pakistanis are similarly on the decline. This, needless to say, builds pressure on Pakistani treasury.

Amid this scenario, the economic mess so created is sometimes blamed on the mammoth China-Pakistan Economic Corridor (CPEC) projects undertaken with Beijing’s help and generous loans. The latest to add to these murmurings is none other than the United States, which said that the huge Chinese debt is responsible for the economic challenges in Pakistan. This State Department statement evoked a robust denial from the man who oversaw the CPEC planning in the Nawaz Sharif government. In a tweet on Friday, Ahsan Iqbal said that the payment of Chinese loan shall begin after 2022 and that will not be more than 2 billion dollars per annum so it is wrong to blame Beijing deals for the economic mess.

Chinese officials have also in the past rebuffed criticism that CPEC projects have burdened Pakistan with unsustainable debts. It may be difficult to pass judgment which position is right or wrong, but this much is undeniable that with a depleting foreign exchange kitty, the country stands on fragile ground.

Published in The Express Tribune, October 14^th, 2018.

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