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With CPEC, Pakistan risks Chinese anger by courting Saudi Arabia

Beijing has insisted that the China Pakistan Economic Corridor (CPEC), the showcase project of President Xi Jinping’s "Belt and Road Initiative”, is purely an economic programme – as its name suggests.

How Musharraf became a Billionaire?

Apparently, the new Pakistani administration of Prime Minister Imran Khan did not receive the memo. In the space of a couple of weeks, it has taken two decisions which have cast the CPEC as a bargaining chip in Pakistan’s complicated, ill-managed relationships with other key partners.

First, it has suddenly reduced the potential value of the CPEC programme to US$50 billion by 2030, down from US$62 billion. In one fell swoop, it decided to starve the western overland route from Xinjiang to the Chinese-operated Arabian Sea port of Gwadar of funding.

 

Pakistan is also considering slashing its planned spending on a CPEC project to rehabilitate its horribly outdated national railways network. Priced at about US$8 billion, it would constitute the single largest project of the enormous programme.

These drastic measures are part of Khan’s urgent response to an unsustainable current account deficit, which is currently at a record level, and severely depleted foreign exchange reserves.

Viewed from his perspective, these issues were brought about, in part, by the greedy enthusiasm of his ousted predecessor, Nawaz Sharif, for the CPEC. Sharif failed to foresee the impact of massive inflows of Chinese machinery on Pakistan’s external finances, which have been kept afloat – barely – by a series of emergency Chinese loans and central bank deposits this year.

Economists are convinced Pakistan has little choice but to apply to the International Monetary Fund (IMF) for a balance of payments bailout. Already, it is clear that any prospective bailout would come at a steep political price.

 

US secretary of state Mike Pompeo has vowed to ensure that any American taxpayer money lent to Pakistan by the Bretton Woods institution would not be used to settle its Chinese debts. Accordingly, the IMF mission to Islamabad pushed for greater disclosure about CPEC project contracts.

 

October 7, 2018

 

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India's River Diversion Plan and South Asia's Waters

More dams are to come, as India’s need to power its economy means it is quietly spending billions on hydropower in Kashmir. The Senate report totted up 33 hydro projects in the border area with Pakistan. The state’s chief minister, Omar Abdullah, says dams will add an extra 3,000MW to the grid in the next eight years alone. Some analysts in Srinagar talk of over 60 dam projects, large and small, now on the books. (This special report has appeared in the Bulletin on Current Affairs - February 2012, you may have to Buy the print edition to read full story)

More in the Edition:

South Asia's Water - a growing rivalry

Indian, Pakistani & Chinese Border Disputes

India's River Diversion Plan: Its impact on Bangladesh

Water Crisis can Trigger nuclear war in South Asia

Reclaimed Water - the Western Experience

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