- 98% of the funds are loans, while 2% are given as grants.
- 8% of the funds were official development assistance.
- China committed $70.3 billion from 2000 to 2021.
KARACHI: Pakistan remains the third-largest recipient of development financing from China in the world, as the Asian country contributes to infrastructure building in the country, with most of the investment in the form of loans and not grants.
This information was revealed in a study by AidData, a United States-based research laboratory, which stated that 98% of Chinese development funds in the last two decades – 2000 and 2000 – were invested in the form of loans and only 2% in grants. Was assigned as. 2021.
AidData noted in its latest release, “Of the total $70.3 billion Chinese development finance portfolio committed to Pakistan between 2000-2021, 8% was official development assistance (grants and highly concessional loans) and 89% was other official sector assistance.” There were debts.” data.
The China–Pakistan Economic Corridor (CPEC), a global infrastructure and investment initiative with an estimated investment of over $45 billion, was launched in 2013 and is considered the largest partnership of Beijing’s Belt and Road Initiative (BRI) . Over time this increased to more than $62 billion and at least $25 billion was invested in Pakistan.
With financial commitments of $14.0 billion, 2017 was the top year for Pakistan; After a decline in 2018, the amount increased again in 2019 and 2020, despite the pandemic. It said that with a maturity of 9.84 years and a grace period of 3.74 years, the average interest rate on the loan is 3.72%.
In Pakistan, the top three sectors from 2000 to 2021 were energy (40%, or $28.4 billion), general budget support (30%, or $21.3 billion), and transportation and storage (14%, or $9.7 billion).
The top three industries in the (BRI) era (2014-2021) were transportation and storage (13%, $7.2 billion), general budget support (30%, $16.08 billion), and energy (43%, $23.29 billion).
Pakistan and China have a long history of economic cooperation and this year marks the completion of ten years of such relations. It has helped Pakistan deal with all its difficult economic recessions and crises.
But what is worrying is that China’s less generous loans combined with Pakistan’s mismanagement have increased Pakistan’s debt burden even more.
Dr. Ammar A Malik, a senior research scientist at AidData, said that between 2000-2021, Pakistan received 161 official sector loans from China worth $68.92 billion, making it the third largest Chinese loan portfolio in the world. became. This includes $28.13 billion of hedged debt, which includes currency swap loans taken by the State Bank of Pakistan and deposits from SAFEs and Chinese state-owned commercial banks.
AidData estimates that Pakistan’s outstanding public and publicly guaranteed debt to China is $67.22 billion, which is 19.6% of GDP, and $21.2 billion less than what Pakistan officially reports to the World Bank’s Debtor Reporting System. billion more.
“In terms of the structure of loans from China, since 2018 China has diverted infrastructure loans towards emergency lending to Pakistan, thereby ensuring that the funds taken by Pakistan for energy, transport and other CPEC projects are The earlier loans taken can be repaid on time and with interest,” Malik said.
“Compared to the Zardari and Sharif years from 2008 to 2017, when the energy and transport sectors dominated, during the PTI government between 2018-2021, the single largest sector was general budget support, which is key to China’s economic ties with Pakistan. “Reflects the pivot from infrastructure-heavy lending to emergency lending to save Pakistan’s economy.”
According to details of implementation of Chinese-financed projects in Pakistan from 2000 to 2021, out of 127 infrastructure projects worth $38.80 billion, only three projects worth $452 million have been canceled or suspended so far. EdData estimates show that environmental, social and governance (ESG) risks are present in 52% of this portfolio of infrastructure projects.
The energy industry has seen the most difficulties in terms of ESG risks, with 51% of portfolios dealing with one or more of these issues.
Pakistan is the largest beneficiary of China’s energy investments in Asia, and has the largest global share of Belt and Road Initiative transportation and storage projects.
With an energy portfolio worth $28.4 billion, Pakistan is the largest in Asia, surpassing both Vietnam ($21.7 billion) and Indonesia ($17.9 billion). Globally, it ranks highest, above both Angola ($24.7 billion) and Vietnam ($21.7 billion). This accounts for 10.2% of China’s total energy portfolio worldwide, which is distributed among many countries.
With highways, bridges and other supporting infrastructure worth $9.69 billion, Pakistan has one of the largest transport sector portfolios in the world.
AdData’s research shows that China is investing more in Pakistan than the US.
China has outstripped the United States in foreign development financing more than any other country since 2012, spending 1.6 times in 2013, 7.7 times in 2016, and 22.4 times in 2021.