Pakistan’s Economic Crisis and Limits of the Sino-Pakistani All-Weather Friendship

Pakistan Finance Minister Asad Umar in an interview with China Global Television Network (CGTN) emphatically stated that it was wrong to blame the China Pakistan Economic Corridor (CPEC) project for Pakistan’s economic problems. Said Umar: “Pakistan has a debt problem for sure, but Pakistan does not have a China debt problem.”

The Pakistan Finance Minister attributed the current economic mess to other reasons — the lack of exports, and failure to generate foreign currency inflows for servicing the debt.

While briefing the press on Nov. 6, 2018, regarding Pakistan PM Imran Khan’s recent China visit, Umar also said that while the economy does face numerous challenges, the country’s Balance of Payments crisis had ended. The Pakistani Finance Minister stated that financial assistance from Saudi Arabia (to the tune of 6 Billion USD), as well as Chinese assistance, had helped in financing the 12 Billion USD gap. Asad Umar’s statement was made a day before an IMF delegation arrived in Pakistan, for negotiation of loans to Pakistan.

Statements by members of Imran Khan’s Cabinet

While Pakistan’s Tehreek-E-Insaaf government, understandably, as well as sections of both the Pakistan media and Chinese media have made repeated reference to China’s commitment to financial assistance, Beijing has not specified any amount. Senior officials have spoken about helping Pakistan, and referred to the ‘all-weather partner’, but not put forward any specifics.

A few things are clear. First, some of the statements made by members of Imran Khan’s cabinet, with regard to the terms and conditions of the CPEC not being favorable to Pakistan have clearly not been appreciated by Beijing. A top official in the Imran Khan government, Abdul Razak Dawood, Prime Minister Imran Khan’s Adviser on Commerce, Textiles, Industry, and Production and Investment, while speaking to a Western media publication  had stated that the negotiations carried out by the previous PML-N government were not well thought out (and unfavorable to Pakistan). Later on, he had to issue a denial. Pakistan’s Railway Minister, Sheikh Rasheed also stated that Islamabad could not afford loans, and would like to reduce the cost of the Karachi-Peshawar rail line from 8.2 Billion USD to 6.2 Billion USD. China had repeatedly stated that the CPEC could not in anyway be held responsible for Pakistan’s current economic challenges.  This includes Foreign Minister Wang Yi who during his visit in September 2018, and stated that only four of the 22 projects of CPEC used China’s concessional loan.

If one were to go by Imran Khan’s statements in China regarding CPEC, as well as Asad Umar’s statements on China, not being responsible for Pakistan’s current economic woes, Beijing seems to have sent a firm message to the Pakistani government to avoid any public criticism of the project as well as economic ties with China.

To give a face saver to Pakistan, Beijing has, of course, offered assistance to bail it out from the current crisis, and also stated that it would ensure that Pakistan benefits from the project. Interestingly, The CGTN on November 4, 2018, carried a story titled ‘Anti-CPEC propaganda fails as Beijing wins Islamabad’s trust’ about differences between both sides being exaggerated.

Second, what is clearly evident is that China may assist Pakistan, but will not part easily with money like Western countries. In recent meetings between top US and Pakistani officials, there have been repeated references to strengthening economic ties. Foreign Minister, Shah Mehmood Qureshi during his visit to the US in October 2018 also referred to the need for the US to revive military aid to Pakistan: “Cutting off training, not giving precision equipment that could have been used against terrorism — I don’t know to what extent that will help.”

Third, rather than reducing Pakistan’s dependence upon other countries, the recent visit has only increased it. Interestingly, it is not just the government, but even sections of Pakistan’s strategic analysts who seem to have no problem with Pakistan’s increasing dependence upon Beijing. Successive governments have made earnest efforts to reduce Pakistan’s dependence upon external forces, but such attempts have been in vain so far and nothing is likely to change in the imminent future.

Fourth, while there has been repeated talk about China’s Debt-trap Diplomacy, it is important to understand that China will deal with resentment and discontent arising out of “debt trap” differently. In the case of Africa, where other countries (including Japan and India) are trying to increase their presence, and local resentment is rising, Beijing is keen to give the impression that it is taking misgiving of local populations seriously. This was evident, not just from President Xi Jinping’s speech at the Forum for China-Africa Cooperation, but a number of articles which have appeared recently in the Global Times where there have been oblique references for China to understand the local situation better. Pakistan, on the other hand, is solely dependent upon China and does not have too many options. Apart from this, the Pakistan army, which calls the shots has close ties with Beijing.

For the time being, the biggest beneficiaries of Imran Khan’s visit have been Beijing and the Pakistan army. The PTI government may be putting up a brave face, but Pakistan’s current economic crisis has further increased Islamabad’s dependence upon Beijing. Khan’s visit and subsequent statements by his colleagues have sent mixed signals to his domestic constituency, but it has been an excellent PR exercise for Beijing which has been projected as Pakistan’s economic savior. By making references (albeit perfunctory) to issues like agriculture, social development and benefits for Pakistan’s local population — during Khan’s visit — Beijing has also attempted to create a perception that it is responsive to Pakistan’s apprehensions, and is keen to expand the ambit of CPEC, and not just restrict it to infrastructural development and connectivity.

Header Image: AFP

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