Author Topic: In Pakistan's currency crisis, China is the problem and the solution  (Read 342 times)

adroth

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In Pakistan's currency crisis, China is the problem and the solution
Having racked up unsustainable bills in supporting Beijing’s infrastructure master plan, Islamabad is bailed out by China to the tune of US$1 billion – leaving it more dependent than ever on its ‘all-weather ally’

BY TOM HUSSAIN

7 JUL 2018

https://www.scmp.com/week-asia/geopolitics/article/2153614/pakistans-currency-crisis-china-problem-and-solution

A last-ditch Chinese loan may have temporarily rescued Pakistan from a foreign exchange reserves crisis, but experts say Islamabad’s growing dependence on Beijing has become as much a liability as it is an asset.

The US$1 billion emergency loan released in the last week of June boosted Pakistan’s reserves enough to cover two months of imports, which have reached unsustainably high levels largely – and ironically – because of Islamabad’s commitment to the Belt and Road Initiative, Beijing’s plan to link Eurasia in a China-centred trading network.

Pakistan’s imports of machinery have spiked as it takes on US$19 billion of power and infrastructure projects for the China-Pakistan Economic Corridor (CPEC) project that will link the Chinese province of Xinjiang to the Arabian Sea through Pakistan. Valued at up to US$62 billion and expected to be fully operational in 2030, the trade corridor is the largest component of the plan.

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“Pakistan’s dependence on China for its economic stability is growing and how dependent it has become is obvious – US$5 billion in non-CPEC funding is a huge sum in Pakistan’s current situation,” said Mohiuddin Aazim, an economic analyst in Karachi.

Pakistan, he said, had no choice but to turn to China because having refused to join the Saudi Arabia-led coalition waging a war in Yemen, it could no longer rely on Middle Eastern allies, whose own finances were weakening anyway.

US assistance to Pakistan has petered out because of disputes over cross-border terrorism into Afghanistan and India. Pakistan narrowly avoided being placed on the “blacklist” of countries considered complicit in terrorist financing and money laundering by the Financial Action Task Force following a complaint by the US, Britain and France.

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« Last Edit: July 13, 2018, 09:19:26 AM by adroth »