China disputes ‘misleading’ US$40 billion debt estimate for Pakistan’s belt and road projects

Concerns over Pakistan’s debt problems have deepened after China said “misleading” figures had been released on how much Islamabad owed for its “Belt and Road Initiative” projects.

Media reports last week said Pakistan would have to repay China a total of US$40 billion over 20 years for infrastructure and development projects under the scheme.

Pakistan newspaper The Express Tribune reported that it was the first comprehensive estimate of Islamabad’s debt repayments for the China-Pakistan Economic Corridor (CPEC), based on documents from the country’s Ministry of Planning and Development.

A spokesman for CPEC also told the newspaper that Pakistan’s Ministry of Finance had given the US$40 billion estimate to the International Monetary Fund in November.

But China has disputed the figure, its embassy in Islamabad issuing a statement over the weekend calling the estimate “wrong and misleading”.

The embassy also released a list of 22 “early harvest projects” in Pakistan totalling US$18.9 billion that have already been completed or are under construction.

Other debt was not owed by the government but was from private deals, according to the embassy.

“The Chinese companies and their partners invested US$12.8 billion in energy projects in Pakistan,” the statement said, along with nearly US$10 billion raised from commercial banks.

Adding to the confusion, Pakistan’s planning ministry also said the US$40 billion estimate was wrong, saying the government owed US$6 billion to Beijing in low-interest loans and grants for infrastructure projects spread over a repayment period of 20 to 25 years.

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Pakistan has sought support from the International Monetary Fund, but both the IMF and the United States have called for greater transparency about its CPEC debt. IMF officials visited Pakistan last month to discuss possible economic policies and reforms that could be supported by the fund.

Naubahar Sharif, a researcher on CPEC from the Hong Kong University of Science and Technology, said the issue of China-related debt was “very sensitive” in Pakistan and an ongoing challenge for Prime Minister Imran Khan, who came to power making promises of increasing transparency.

“This debate over what the actual numbers are shows how difficult it is to obtain transparency, depending on who you talk to,” Sharif said. “If we are unable to come to an agreement about these macro issues, it’s unlikely that the fine detail and fine print is going to be any less difficult to see eye to eye on.”

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Sharif expected more scrutiny of the CPEC-related debt figures. “I think it’s inevitable – this is one case in point to uncover just some of the preliminary details, and the difficulty that has already been encountered is a harbinger of things to come,” he said.

The United States, which holds significant power at the IMF, has repeatedly warned that bailout money should not be used to fund China-related projects.

Sharif said US pressure would add to the IMF’s desire to know the status of Pakistan’s CPEC debt.

“As far as the IMF is concerned, because of what the US is saying, there will be a high degree of concern to know what the numbers are, and to what extent the IMF money is going to servicing those numbers, or to really restructuring and improving the domestic economic outlook,” he said.

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Du Youkang, director of Fudan University’s Pakistan research centre, said figures on the CPEC projects were not clear, and the Chinese embassy had sought to provide clarification.

“If these figures are not released, people are forced to guess and nobody knows what’s really going on. It’s important to increase transparency, that way no one can distort the facts,” he said.

The CPEC is designed to connect China’s far west region of Xinjiang with Gwadar port in Pakistan via a network of motorways, railways, oil pipelines and trading hubs. Expected to be finished by 2030 it would provide China with an important trading route to the Middle East and Africa.