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Business

CPEC to inflict heavy debt burden on Pakistan: US

Washington/Islamabad, Nov 24

The US has warned that the China-Pakistan Economic Corridor (CPEC) would only benefit Beijing and inflict heavy debt burden on Islamabad.

Addressing a gathering at the Wilson Center, a Washington think-tank, US South Asia Assistant Secretary Alice Wells said the multi-billion-dollar project would take a toll on Pakistan's economy, Dawn reported.

Wells emphasised the CPEC was not an aid to Pakistan but a form of financing that guaranteed profits for Chinese enterprises, with little benefits for Islamabad.

"The CPEC's most expensive single project is upgrading the railway from Karachi to Peshawar. When the project was initially announced, the cost was set at $8.2 billion," she said.

But in October 2018, Pakistan's Railways Minister announced that they had negotiated the cost down to $6.2 billion, a saving of $2 billion, she said. "He explained that Pakistan is a poor country and can't afford this huge burden of loans," the US diplomat said.

But according to recent media reports the price had risen to $9 billion, she said. "So, why doesn't the Pakistani public know the price for CPEC's most expensive project or how it's being determined?"

The US diplomat pointed to the long-term effects of China's "financing practices" and urged Islamabad to assess "the burdens that are falling on the new government". The current debt included an estimated $15 billion to the Chinese government and $6.7 billion in Chinese commercial debt, the diplomat said.

Wells asserted that China was providing loans, not grants, as the US.

"It's clear or needs to be clear that the CPEC is not about aid. This is almost always the form of loans or other forms of financing, often non-concessional with sovereign guarantees or guaranteed profits for Chinese state-owned enterprises that are repatriated to China," she said.

"Now, together with non-CPEC Chinese debts payments, China is going to take a growing toll on the Pakistan economy, especially when the bulk of payment starts to come due in the four-six years."

Even if loan payments were deferred, she said, "they are going to hang over Pakistan's economic development potential, hamstringing Prime Minister (Imran) Khan's reform agenda."

Wells urged Islamabad to introduce economic reforms that would encourage US investors to invest in Pakistan.