KARACHI: Pakistan’s newly appointed Minister for Planning Asad Umar on Saturday rejected US reservations on the nearly $70 billion China Pakistan Economic Corridor (CPEC) and said relations between ‘iron brothers’ Beijing and Islamabad would ‘never be frayed.’
Umar’s strong clarification came in response to remarks by US diplomat Alice Wells on Friday, who said the CPEC would further add to Pakistan’s debt burden. Wells is in charge of South Asia affairs at the US State Department.
“China is a close, time-tested friend, who stood with us during the most difficult situations. We are iron brothers and have to further strengthen the friendship and take CPEC forward to bring the relationship even closer,” Umar said at the Karachi Press Club.
“This does not mean that our friendship with China goes against anyone. All countries including the US are welcome to invest in Pakistan,” he said, and added: “We don’t want to create any situation where we become a part of the conflict between other countries.
Pakistan denied that the country was heavily in debt due to Chinese loans and said loans from China made up less than a quarter of total public debt.
“Our total public debt is $74 billion of which the Chinese debt amounts to $18 billion-- even less than one fourth of the total debt. And if I further break it down, the CPEC debt under this figure of public debt is $4.9 billion-- not even 10 percent of the total debt,” the minister said.
“As far as the money taken from China is concerned, it was taken at such a time when our trade deficit was dangerously high and our reserves were falling. We were unable to easily procure loans from other sources. This was the hallmark of China’s friendship with Pakistan that in such a time of crisis, it provided us loans from its commercial banks.”
Over the next three years, he said, debt servicing would witness about a third being spent on settling the commercial loans from China, and the commercial borrowing would be substituted by long-term, multi-lateral debt leading to a sharp decline in Chinese debt servicing.
Umar refuted Wells’ argument that the Chinese commercial loans were too expensive and had too short a payback period.
“The average maturity of public debts is 20 years. The interest on the loan is only 2.34 percent and that makes it a very cheap loan,” he said.
Umar did concede that China was making an investment in Pakistan and was not handing out aid.
“She (Alice Wells) is right-- it is basically an investment and Pakistan never said that this is aid. Pakistan’s stance is very clear that we want to move away from the dependence on aid.”
But following a systematic negation of Wells statements, Umar said it was untrue that China would be the sole benefactor of CPEC, while listing the many infrastructural and other advantages to Pakistan.
Pakistan rejects US warning on CPEC, reaffirms commitment to 'iron brother' China
Pakistan rejects US warning on CPEC, reaffirms commitment to 'iron brother' China
- Minister of planning was responding to a ‘warning’ against CPEC by US diplomat Alice Wells
- China’s share only $18 billion in Pakistan’s $74 billion total public debt, minister said
IMF Executive Board to review $1.2 billion loan disbursement for Pakistan today
- Pakistan, IMF reached a Staff-Level Agreement in October for second review of $7 billion Extended Fund, climate fund program
- Economists view IMF bailout packages as essential for cash-strapped Pakistan grappling with a prolonged macroeconomic crisis
ISLAMABAD: The Executive Board of the International Monetary Fund (IMF) is set to meet in Washington today to review a $1.2 billion loan disbursement for Pakistan, state media reported on Monday.
Pakistan and the IMF reached a Staff-Level Agreement (SLA) in October for the second review of a $7 billion Extended Fund Facility (EFF) and the first review of its $1.4 billion Resilience and Sustainability Facility (RSF).
The agreement between the two sides took place after an IMF mission, led by the international lender’s representative Iva Petrova, held discussions with Pakistani authorities during a Sept. 24–Oct. 8 visit to Karachi, Islamabad and Washington D.C.
“The International Monetary Fund’s (IMF) Executive Board is set to meet in Washington today to review and approve $1.2 billion in loan for Pakistan,” state broadcaster Pakistan TV reported.
Pakistan has been grappling with a prolonged macroeconomic crisis that has drained its financial resources and triggered a balance of payments crisis for the past couple of years. Islamabad, however, has reported some financial gains since 2022, which include recording a surplus in its current account and bringing inflation down considerably.
Economists view the IMF’s bailout packages as crucial for cash-strapped Pakistan, which has relied heavily on financing from bilateral partners such as Saudi Arabia, China and the United Arab Emirates, as well as multilateral lenders including the IMF, World Bank, Asian Development Bank and Islamic Development Bank.
Speaking to Arab News last month, Pakistan’s former finance adviser Khaqan Najeeb said the $1.2 billion disbursement will further stabilize Pakistan’s near-term external position and unlock additional official inflows.
“Continued engagement also reinforces macro stability, as reflected in recent improvements in inflation, the current account, and reserve buffers,” Najeeb said.
Pakistan came close to sovereign default in mid-2023, when foreign exchange reserves fell below three weeks of import cover, inflation surged to a record 38% in May, and the country struggled to secure external financing after delays in its IMF program. Fuel shortages, import restrictions, and a rapidly depreciating rupee added to the pressure, while ratings agencies downgraded Pakistan’s debt and warned of heightened default risk.
The crisis eased only after Pakistan reached a last-minute Stand-By Arrangement with the IMF in June 2023, unlocking emergency support and preventing an immediate default.
