Pakistan’s financial constraints and China’s ambitions to complete the CPEC projects seem to have driven a wedge between Islamabad and Beijing.
While China is seeking to form a joint parliamentary oversight committee, Pakistan is struggling to repay the infrastructure loans under the China-Pakistan Economic Corridor (CPEC) projects, part of President Xi Jinping’s ambitious Belt and Road Initiative (BRI).
According to media reports, Pakistan and China have been discussing easing terms on the repayment of loans on about a dozen power plants. Pakistan with its current financial situation is becoming a victim of China’s debt trap such as Sri Lanka and Malaysia.
Quoting sources, The Economic Times reported: “The parties have canvassed Beijing’s willingness to stagger debt payments, as opposed to lowering equity returns”. So far, the talks have been informal but Pakistan will formally pitch the request to defer debt payments to China.
On the other side, Beijing has been concerned about the slow pace of CPEC projects and is now trying to further control the speed and quality of projects. Late last month, Li Zhanshu, the chairman of the National People’s Congress of China, in a virtual meeting with Asad Qaiser, the speaker of Pakistan’s National Assembly, had proposed the formation of a joint committee on the China-Pakistan Economic Corridor (CPEC).
Following the meeting, both heads of parliament directed their secretaries to form a joint parliamentary oversight committee. Now, Pakistan’s Cabinet Committee on CPEC has directed ministries to improve the pace of work on CPEC projects, part of BRI.
Experts believe that China wants to get more closely involved in each CPEC project due to both security challenges and the economic and social impacts of the Covid-19 pandemic on Pakistan. They suggest that Beijing doesn’t want to pour any more money without exercising greater control.
As reported earlier by The EurAsian Times, the main project of CPEC worth $6.8 billion, the Main Line 1 (ML-1) railway project, has been delayed due to the unsettled financial structure. China had raised the issue of additional guarantees before sanctioning the loan for the project.
A major milestone for the second phase of CPEC, the Main Line 1 project, includes upgrading the 1,872-km railway track from Peshawar to Karachi. Experts fear that if China tries to take more control of the projects, it might result in resentment among the local residents against the project and the Pakistan government.
Malik Siraj Akbar, a South Asia analyst based in Washington, told Nikkei Asia that: “Getting things done quickly will benefit China in the short term but it will alienate the local populations in the long run.”