After Sri Lanka, Pakistan on fast lane to go bust with common China link
Photo credit Twitter Shehbaz Sharif
By Manish Anand
New Delhi, January 4: In just about one year, Pakistan has lost two-third of its foreign currency reserves. Sri Lanka had similar journey – vanishing foreign currency reserves.
From $15 billion a year ago, Pakistan is left with just about $5 billion of the foreign currency reserves. The Sri Lankan regime headed by Gotabaya Rajapaksa had sleep-walked into financial bankruptcy last year. The popular ‘Go Gotta Go’ campaign later sent the Rajapaksa family packing from the ruling dispensation in Colombo.
Sri Lanka was left with a few million dollars when the country had announced that it had defaulted on the foreign debt servicing obligations. Pakistan is fast heading into the crisis, as Islamabad’s foreign debt is ballooning, which has crossed $130 billion level.
The Pakistani government in a first sign of looming financial bankruptcy imposed an electricity emergency in the country, ordering the shops and malls to shut down by 8.30 PM, while throwing old electric gadgets in the government departments to the garbage. The move is aimed to cut down on the energy bill. Pakistan like any oil-importing country has been hit hard by the energy crisis globally following the Russian invasion of Ukraine.
While China accounted for roughly 10 per cent of the foreign debt of Sri Lanka, the case of Pakistan is alarming. Pakistan has taken over $30 billion of debt from China, which comes to over 25 per cent of its total foreign loans. Worse, the Chinese loans, as Sri Lanka learnt by burning its fingers, comes at a rate of about four per cent annually against one or two per cent charged by the institutional agencies. Sri Lanka had also known by sellouts of assets that China never forgives its loans, and that the financial experts describe as the Chinese debt-trap strategy, which has spread over to about 60 countries so far.
Incidentally, while Pakistan is forcing people to stay indoor after the sunset to save energy bill, Islamabad has been handed over a $3 billion project to modernize its railway line by China. The Pakistani domestic politics is currently mired in a raging controversy over an import of sub-standard Chinese rail coaches at a cost of over $150 million.
The Pakistani people are reported to be turning against China, as they vent out their anger against the Chinese workers at places such as Gwadar Port. The Chinese nationals and institutes run by them had of late come under terrorist attack in Pakistan also.
Pakistan’s Prime Minister Shehbaz Sharif and the German Chancellor Olaf Scholz were the only two high dignitaries who had rushed to Beijing to fête Xi Jinping for getting the third term as the general secretary of the Chinese Communist Party. On his return, Sharif committed to the China-Pakistan Economic Corridor (CPEC) project, while also mooting the idea to rope in Turkey.
While Sri Lanka was saved by an Indian assistance of $4 billion and subsequent bailout package of the International Monetary Fund (IMF), Pakistan is struggling to find receptive audience in the multilateral financial institutions.
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