Published 13:29 IST, August 28th 2020
Amid political instability, China's banks consider curtailing investment in Pakistan
Owing to the unstable political climate in Pakistan, several financial institutions and banks of China have been reluctant in investing in the CPEC
- World News
- 2 min read
Owing to the unstable political climate in Pakistan, several financial institutions and banks of China have been reluctant in investing in the China-Pakistan economic corridor (CPEC), the flagship component of Beijing’s massive Belt and Road (BRI) infrastructure project.
Pakistan's Foreign Minister Shah Mehmood Qureshi discussed the issue with Chinese authorities during his visit to the country last week. As for China, CPEC is a geopolitical game-changer as it helps in Chinese expansionism. Whereas for Pakistan, it is the only opportunity for economic modernisation. Over the last six months, the multi-billion-dollar project has been a source of interest as well as a concern, amid a global debate over its potential and problems.
Troubles have mounted for the Imran Khan government as its projects have turned into massive failures in the recent months. In May 2020, a committee investigating the losses in Pakistan's power sector has allegedly dug out a $625 million scam. The money trail leads to China as the power sector involves two Chinese producers - Huaneng Shandong Ruyi energy (HSR) and Port Qasim Electric Power Company Limited.
Both companies are also connected to CPEC power projects. The Chinese power plants have allegedly violated standard procedure and engaged in malpractices. Both the plants charged excess set-up costs for more profits, allowing them to earn annual profits of up to 50 to 70 % The cost was borne by the Pakistani consumers.
No oil to Pakistan from Saudi Arabia
Meanwhile, Saudi Arabia has halted the provision of "oil on loan" to Pakistan. In 2018, Islamabad had borrowed $6.2 billion in loan from Riyadh, of which $3 billion was debt relief in cash and the remaining $3.2 billion was the worth of oil Saudi Arabia had decided to provide Pakistan annually.
The provision expired two months ago and Saudi Arabia has not renewed it. Instead, it has forced Pakistan to pay $1 billion from the cash loan it had borrowed.
Updated 13:29 IST, August 28th 2020