China furious with Pakistan for delay in implementation of CPEC projects

YEARS |
Updated: May 21, 2023 3:45 PM IS

Islamabad (Pakistan), May 21 (ANI): Caught in a quagmire between political instability and economic turmoildevelopment projects under the China-Pakistan Economic Corridor (CPEC) have been delayed in Pakistan, angering China, The Friday Times reported.
China is particularly angry that it has recently helped Pakistan by providing much-needed loans and support. Diplomatic sources say the Chinese authorities are “very upset” by the mismanagement in Pakistan.
“China extended the loans with an IMF performance and renewal guarantee, but this did not happen. The power plant payment is stuck in billions. (Pakistani) The government gave guarantees, but practically nothing happened,” he said a senior diplomat
However, International Monetary Fund (IMF) funding is still in doubt, Pakistan can barely execute plans, let alone complete development projects under CPEC, The Friday Times reported.
China, the diplomat added, is also concerned about the political instability in Pakistan. “We hear that due to continued delays, considering future challenges, the IMF is demanding an $8 billion loan deal, and this may increase with the delays as more repayments come in. Inflation has (also) increased, so the IMF also wants (some) real interest (from Pakistan).”
The political unrest that has engulfed Pakistan since former Prime Minister Imran Khan was arrested earlier this week will complicate efforts to secure a financial lifeline from the International Monetary Fund and exacerbate the country’s economic crisis.

Growth has stalled and inflation has skyrocketed in the South Asian country of 220 million people over the past year. With Pakistan’s rupee depreciating sharply and foreign currency reserves dwindling, the country has struggled to import essential goods such as food, leading to deadly stampedes at distribution centers. Fears that Pakistan could default on its debt have been lurking for months, CNN reported.
Now, as nationwide protests and violent clashes sweep the country following Khan’s dramatic arrest on corruption charges, the country’s ability to secure much-needed financial aid has been thrown into further doubt.
Also, investors are skeptical that Pakistan and the IMF can reach a deal to unlock much-needed funds as the volatile political environment adds to the uncertainty ahead of the autumn elections.
Growth has slowed while a severe dollar deficit hampers imports. Food shortages are contributing to soaring prices. Inflation reached an annual rate of 36.4% in April, and the cost of food rose nearly 47% in urban areas and more than 52% in rural regions, CNN reported.
According to Tahir Abbas, director of research at Arif Habib, a financial firm in Karachi, foreign exchange reserves at the central bank of about $4.4 billion are enough to cover about a month of imports.
What is known as a “balance of payments” crisis is eroding living standards in a country still recovering from last year’s devastating floods. It could “reverse the poverty gains made in the past two decades and further reduce the incomes of already poor households,” the World Bank warned last month.
Questions have also been raised about Pakistan’s ability to keep up with its debt payments. Ratings agency Moody’s downgraded the country’s credit rating at the end of February, noting that foreign currency reserves were “much lower than necessary to cover its import needs and external debt obligations in the short and medium term.” (ME TOO)