Asian Angle | With CPEC, Pakistan risks Chinese anger by courting Saudi Arabia

First, it has suddenly reduced the potential value of the CPEC programme to US$50 billion by 2030, down from US$62 billion. In one fell swoop, it decided to starve the western overland route from Xinjiang to the Chinese-operated Arabian Sea port of Gwadar of funding.

Pakistan is also considering slashing its planned spending on a CPEC project to rehabilitate its horribly outdated national railways network. Priced at about US$8 billion, it would constitute the single largest project of the enormous programme.

These drastic measures are part of Khan’s urgent response to an unsustainable current account deficit, which is currently at a record level, and severely depleted foreign exchange reserves. Viewed from his perspective, these issues were brought about, in part, by the greedy enthusiasm of his ousted predecessor, Nawaz Sharif, for the CPEC. Sharif failed to foresee the impact of massive inflows of Chinese machinery on Pakistan’s external finances, which have been kept afloat – barely – by a series of emergency Chinese loans and central bank deposits this year.

Economists are convinced Pakistan has little choice but to apply to the International Monetary Fund (IMF) for a balance of payments bailout. Already, it is clear that any prospective bailout would come at a steep political price. US secretary of state Mike Pompeo has vowed to ensure that any American taxpayer money lent to Pakistan by the Bretton Woods institution would not be used to settle its Chinese debts. Accordingly, the IMF mission to Islamabad pushed for greater disclosure about CPEC project contracts.

This raises a poignant question: was the Khan administration’s decision to dump the western CPEC route an attempt to persuade the US to soften its line on multilateral financial assistance?