Pakistan will be paying China $90b against CPEC-related projects

[Firdousi]

Pakistan will be paying China $90b against CPEC-related projects

KARACHI: Pakistan will end up paying $90 billion to China over a span of 30 years against the loan and investment portfolio worth $50 billion under the China-Pakistan Economic Corridor (CPEC), report of a brokerage house estimated.

The estimated return – sum of principal and interest on foreign currency debt and repayment of profits/dividend on equity investment – shows 40% return on investment.

The amount increased to $54 billion after the inclusion of more projects in CPEC such as investments in Pakistan Railways and financing of the Karachi Circular Railways project. The volume of return would increase accordingly. Infrastructure and power projects – part of the CPEC portfolio and divided across time in terms of priority – are expected to be completed by fiscal year 2030.

Topline Securities, in its report, said leading economists have estimated annual average repayments of $3-4 billion per year post fiscal year 2020.

“Average annual repayment of CPEC will be $3 billion. {However, in medium term} between fiscal year 2020-25, it will range between $2.0-5.3 billion with average payment of $3.7 billion,” Saad Hashemy, an analyst at the brokerage house, said in a report titled, ‘Pakistan’s External Account Concerns and CPEC Repayment’.

Another valid concern is over the repayment of CPEC-related projects. This is because most projects are being funded abroad and Pakistan is not seeing any significant inflow of foreign exchange.

“It should be noted that project financing for CPEC is being done between Chinese companies and banks and around 25% of CPEC investment is expected to come in Pakistan,” he said. The report argued the repayment would remain manageable despite additional burden of debt servicing and repatriate of profits on equity investment in CPEC. The amount for additional repayment would be generated from the expected surge in exports, drop in imports and increased inflow of remittances.

Trade

The brokerage house assumed exports to grow by 4.5% a year till fiscal year 2025, which is higher than the previous decade’s average of 3%. This is because of expectation of CPEC-led higher GDP growth in the coming years and positive impact on local industry.

Imports are expected to grow by 4% in line with last decade’s average. Further, remittances are expected to grow within 4-4.5%, which is lower than last couple of decade’s average of over 7% as Pakistani diaspora has to a great extent shifted to official channels of transferring money.

“We expect current account deficit to remain on average at 1.5% of GDP between FY20-25 at a range of 1.2%-1.8%,” it said. In addition, Arif Habib Limited estimated, CPEC-related transportation would earn $400-500 million per annum to Pakistan, which would be sufficient for repayments.

Revised macro estimates

At the same time, Topline Securities said Pakistan’s current account deficit (CAD) in the first seven months of current fiscal year 2017 remained much higher than expectation at $4.7 billion, which is 88% higher than last year.

“The higher CAD was mainly on account of weak exports of $12.3 billion, which posted a decline of 1.3% while imports of $25.5 billion increased by 9%,” it said. “Given the large CAD…, we are revising up our CAD forecast to $6.6 billion (from previous $4.7 billion), which is 2.2% of GDP,” it added.

“Given higher CAD, we are revising down our year end forecast of foreign exchange reserves to $22-23 billion from previous estimate of over $25 billion. “These are all time high foreign exchange and provide 4-5 months of import cover (accounting for only reserves with State Bank of Pakistan of $17-18 billion),” it said.

Pakistan will be paying China $9b against CPEC-related projects - The Express Tribune

[Firdousi]

What kind of "investment" is this, Pakis? Seems you will have to pay it back with a lot of interest. It looks more like a loan.

Oh man I love the way Pakistani establishment is taking advantage of Pakistani´s st*pidity. This people are so st*pid, so dumb, that they will believe everything. The end of this fake country is near. Its already falling apart. :D

[Peacelove]

Do you know the ABCD of Finance ?

[Iblis_Efreetzai]

In Soviet Pakistan, you pay China to invest in your country

[Porus]

In Soviet Pakistan, you pay China to invest in your country

Hahahaha

[logical]

What kind of "investment" is this, Pakis? Seems you will have to pay it back with a lot of interest. It looks more like a loan.

Oh man I love the way Pakistani establishment is taking advantage of Pakistani´s st*pidity. This people are so st*pid, so dumb, that they will believe everything. The end of this fake country is near. Its already falling apart. :D

Nawaz Sharif is corrupt and may soon be behind bars after court ruling. They have sold Pakistan to China in return of commission.

[ComradePashtun]

Firdousi,

CPEC is analogous to a person who in order to avoid bankruptcy would yet resort to more expensive loans to pay the existing. Pakistan is doing the wrong thing to bring semblance into its economy and not following the right course towards its long-term and sustainable development.

Bad signs are already emerging as much of the CPEC game-changer fantasy is still shrouded in mystery. It would be wrong to assume that the project would not bring any good, however it is far-fetched to simply think that it will solve the economic and development woes of the country. Other than a period of a boost in the services sector (remember Chinese are known to use all contents from labour to materials of their own even in Africa let alone Pakistan which is next door) it is difficult to follow how the project would play the so-called "game-changer" role for the rest of the Paki economy. It takes a lot more than that.

Even if Pakistani firms and government play a significant role in the building of infrastructure it could potentially harm the rest of the sectors of the economy through the crowd out effect. As the project takes off (especially if this leads to a boom in service and construction sector)Pakistani firms and government would borrow both from domestic and foreign capital markets and this would make less capital available to the remaining sectors the actual backbone of the economy. This is would make borrowing even expensive (borrowing rates are already high in pak among the countries in the region) and therefore you could see a downturn in the real economy (manufacturing and agriculture) and thus decline of revenues for the government thus leading to further borrowing by the government etc. and the cycle could go on until the boom cools off. Hence my analogy above of this fantasy called CPEC. With the port and some of the infrastructure leased by the Chinese for 40 years is mid-boggling. I am just speculating may be a Pakistani member can throw some light on the subject.

Pakistan's best course for its long-term and sustainable development lays in regional peace, harmony and lots of trade and economic integration, particularly with its neighbours. No country has ever succeeded without trading with its neighbours. Pakistan would not pull it off in a thousand years and China will swallow it up. This CPEC is for China and Chinese purpose primarily and for most part.

Have you heard of the saying that a clever bird gets trapped in two strings at the same time or something? But may be Pakistan was too desperate and not actually even the clever?


Seems like becoming self-sufficient is ever more elusive; no end to IMF loans and foreign and in particular U.S aid and dependency.

[ComradePashtun]

India has suspended trade with Pak along the Kashmir border. Paki minister for trade wants to resume trading with Afghanistan.

[Peshawar_222]

Firdousi,

CPEC is analogous to a person who in order to avoid bankruptcy would yet resort to more expensive loans to pay the existing. Pakistan is doing the wrong thing to bring semblance into its economy and not following the right course towards its long-term and sustainable development.

Bad signs are already emerging as much of the CPEC game-changer fantasy is still shrouded in mystery. It would be wrong to assume that the project would not bring any good, however it is far-fetched to simply think that it will solve the economic and development woes of the country. Other than a period of a boost in the services sector (remember Chinese are known to use all contents from labour to materials of their own even in Africa let alone Pakistan which is next door) it is difficult to follow how the project would play the so-called "game-changer" role for the rest of the Paki economy. It takes a lot more than that.

Even if Pakistani firms and government play a significant role in the building of infrastructure it could potentially harm the rest of the sectors of the economy through the crowd out effect. As the project takes off (especially if this leads to a boom in service and construction sector)Pakistani firms and government would borrow both from domestic and foreign capital markets and this would make less capital available to the remaining sectors the actual backbone of the economy. This is would make borrowing even expensive (borrowing rates are already high in pak among the countries in the region) and therefore you could see a downturn in the real economy (manufacturing and agriculture) and thus decline of revenues for the government thus leading to further borrowing by the government etc. and the cycle could go on until the boom cools off. Hence my analogy above of this fantasy called CPEC. With the port and some of the infrastructure leased by the Chinese for 40 years is mid-boggling. I am just speculating may be a Pakistani member can throw some light on the subject.

Pakistan's best course for its long-term and sustainable development lays in regional peace, harmony and lots of trade and economic integration, particularly with its neighbours. No country has ever succeeded without trading with its neighbours. Pakistan would not pull it off in a thousand years and China will swallow it up. This CPEC is for China and Chinese purpose primarily and for most part.

Have you heard of the saying that a clever bird gets trapped in two strings at the same time or something? But may be Pakistan was too desperate and not actually even the clever?


Seems like becoming self-sufficient is ever more elusive; no end to IMF loans and foreign and in particular U.S aid and dependency.

IMF loans have been returned back , we are not dependent on US aid as much as we were before and our economy is at an 8 year high . CPEC is a detailed topic .

http://www.trtworld.com/opinion/what...economy-306535

Over the past few months, Pakistan’s economy has received largely positive coverage in a number of international media outlets. For a country usually in the news for its endemic political instability and prolonged battles with Islamist militancy, this shift in focus heralds an interesting change.
Underpinning much of the coverage is a set of core statistics: the country’s GDP growth rate crossed 4 percent last year, and is expected to surpass 5.5 percent in 2017. The stock market rose by 46 percent in 2016, and is now in line for an upgrade to emerging market status by the middle of 2017. Foreign exchange reserves have grown to a record high of $20 billion, while more inflows are expected via a number of big-ticket energy and transit projects under the $57 billion China Pakistan Economic Corridor (CPEC). Finally, measurements by the United Nations Development Program (UNDP) show multidimensional poverty declining from 55 percent of all households in 2005 to 38 percent in 2015.
Beyond macroeconomic indicators, another factor that has received considerable attention in recent coverage is the country’s growing middle class. One recent piece, published in the Wall Street Journal, cited this burgeoning middle class as the primary fuel behind the twin boon of democratic stability and economic growth.
Depending on the definitions used, Pakistan’s middle class is estimated to be anywhere between 5 to 35 percent of the population. Using income-based methods, the Pakistan Institute of Development Economics (PIDE) finds that approximately 55 million people earn between 75 to 125 percent of the overall median income. Credit Suisse, on the other hand, estimates that 9.7 percent of Pakistan’s adult population, around 7 million people, possess wealth between $10,000 and $100,000. By this measure, Pakistan’s would be the 18th largest middle-class in the world.
Similar expansion at the upper-end of the consumer market can be gauged from the sale of passenger cars, which rose from 40,000 units in 2000 to nearly 200,000 in 2016. A considerable portion of this market is now financed through credit, as banking outlays for the purchase of automobiles hit an all-time high of $1.1 billion in 2016, up from $415 million in 2012.
Beyond descriptive statistics, the spatial and visual transformation in Pakistan’s expanding urban centres tell a similar story. Private schools and colleges have cropped up everywhere, offering instruction in the English language as their contribution towards personal enrichment and upward mobility. Similarly, new real estate developments in housing and retail can be found selling profitability and modern amenities to investors and consumers respectively. Advertising campaigns for these projects often rely on some variant of an idealised western lifestyle, clearly playing on, and perhaps in part shaping, the aspirations of a vociferous market.
We have Witnessed Increasing FDI from countries like Netherlands , Turkey and France .
https://www.thenews.com.pk/print/192...-July-February
KARACHI: Pakistan’s foreign direct investment (FDI) inflows rose 6 percent to $1.284 billion in eight months of current fiscal year of 2016/17, with major inflows going to food, construction, and electronics sectors, data released by State Bank of Pakistan showed on Thursday.
The country drew $1.211 billion in FDI in the corresponding period of last fiscal year. Almost half of the total FDI inflows were received from Netherlands followed by China, Turkey, and France. However, inflows from other countries remained unimpressive.
The inflows from Holland came from a Dutch firm, which invested $467.8 million in the country during July-February FY17 against $24.4 million in July-February FY16.

[marwat]

pakistan is at the end of it's life span.

[ComradePashtun]

Here is the remainder part which you have conveniently left out..


There is no doubt that Pakistan’s economy has seen qualitative shifts towards increased marketisation and commodification in the past two decades. However, the claims extrapolated from these shifts require further scrutiny. For example, given its size and internal variation, it is difficult to assert a uniform effect of the middle class on democratic stability. At this stage, what can be gingerly asserted is that middle class consumers are gradually finding their voice in demanding improved public services from various tiers of elected governments. This trend has been partially supported by the presence of a rabidly active private media sphere, which speaks to and for its largely middle class audience, and the popularity of the Pakistan Tehreek-i-Insaf (PTI), a party anchored in its middle class support base. Both have helped shift political discourse to a somewhat more technocratic disposition.
At a more structural level, sustainable growth and an inclusive route to middle-class existence in Pakistan are still far from established. Stable employment opportunities in the manufacturing sector, which historically offered a path to upward social mobility in other countries, are absent due to persisting industrial stagnation. Share of large-scale manufacturing in total GDP and employment has hovered around the 14*and 11 percent*mark respectively for the past two decades. The country’s growth trajectory is now increasingly underpinned by low labour absorbing enterprises in retail/wholesale trade, construction, transport and communication, and financial services.
In the absence of a stable path up the socioeconomic ladder, those who have graduated to middle class status in the past few decades have mostly done so through employment in the public sector, or on the back of successful small-scale entrepreneurship in the services economy.
Both of these routes do not offer a sustainable resolution to the aspiration of millions of individuals. One primary consequence of the absence of clear pathways is that while the overall poverty rate has gone down, wealth and income inequality have both risen. The upper 20 percent*of the income distribution now consumes 7 times more than the bottom 20 percent, up from 4 times more in 1990.
Another related outcome is the steady rise of unemployment, which official figures place at 6 percent, but more rigorous measures place closer to 15 percent. As of 2017, Pakistan’s economy needs to grow at 7 percent*per year*just to accommodate 2 million new entrants in the labour force every year.
None of these cautionary notes should be used to dismiss more optimistic takes on the country’s future. Recent developments, such as the aforementioned expansion in the middle class, decline in poverty, greater GDP growth, and increased Chinese investment, do provide a base on which to build a more inclusive and productive economy. However, this would require considerable investments in infrastructure development, social protection, and human capital at a scale which only the government can undertake. It is therefore prudent to suggest that without these much-needed accompanying interventions, Pakistan’s middle-class growth will likely be both exclusionary and short-lived.

[ComradePashtun]

Pakistan: External Debt Leaving Little Room for Development

The Finance Minister of Pakistan, Muhammad Ishaq Dar has been painting*a rosy picture of Pakistan’s economy. However, the perspective changes when he talks about external debt and liabilities.

The stark contrast of the situation came to light earlier this month, at a meeting chaired by the minister over matters related to the Debt Policy Coordination Office. The meeting discussed the debt policy of the country where he stressed on effective debt management for long term economic growth. The senator strongly believes that Pakistan has managed its debt very carefully and is capable to repay this mounting debt in the years to come.

While chairing a meeting at the Ministry of Finance, he gave special emphasis on the highest ever reserves which have reached an all-time high of $24 billion that includes $19 billion reserves held by SBP along with $5 billion residing in reserves with private banks. In addition, he added:

“As of today, external debt servicing obligations for Pakistan are not more than an average of $5bn per annum until 2021. Keeping in view the track record of the country, this amount of repayments should not raise any concern”

The minister only referred to public debt at*$48.1 billion,*the value as of 30th June 2013. While the remaining $12 billion, other liabilities that take the total foreign debt figure to $60 billion during the same period, were conveniently ignored.

According to the figures given by SBP as of 30th September 2016:

Pakistan’s total external debt and liabilities stand at $74.6 billion
Out of the above, public sector debt stood at $62.4 billion, public sector enterprises’ debt at $2.76 billion. Moreover, bank borrowing stood at $2.95 billion while non-resident deposits at $0.7 billion, private sector guaranteed debt $3.57 billion and debt liabilities to direct investors at $2.95 billion

Should Pakistan be Deluded by Highest Foreign Exchange Reserves?

The ministry of finance is praising its efforts in creating highest ever foreign exchange reserves of $24 billion. These numbers indicate sound economic standing as per the proponents of the current government. However, the question arises whether this growth is due to increasing exports, higher remittances and declining imports or is it triggered by increased borrowing. The answer is the latter; the government resorted to IMF loans and local bank borrowing.

IMF borrowing obviously came with a few terms and conditions. It included reduction of fiscal deficit, privatization of state organizations and expanding the revenue base through higher taxes.


IMF’s Optimistic Approach; The Real Economic Indicators Do Not Look Promising

IMF has always been a backup plan for most of the governments and this time it has provided a highly optimistic evaluation of Pakistan’s economy. In its recent reports, it has ignored many important indicators which show a struggling*economy in the long run. These include minimal growth in exports, rising deficits, currency devaluation, slower credit extension to private sector and rising corruption.

The real pointers show a slightly different picture as the tax to GDP ratio is not improving. In addition, the circular debt is not only haunting public entities but also funding rising fiscal space.

An optimistic picture will undoubtedly enable Pakistan to get access to more foreign lending to meet current expenditures. However, the move will further push Pakistan into the debt cycle. The history suggests that IMF funding instead of solving the economic issues of debtor economies grips them into a never ending debt cycle. Consequently, inability to service the current debt forces economies to reschedule it further. Therefore, it will be passing in on to the future governments.

Quick Read: New tax audit policy – over 93,000 taxpayers selected for audit
Despite the above mentioned drawbacks, the senator’s aggressive approach may prove to be good for the economic growth but it has to be sustainable in the long run. Rising debt may hamper growth as there would be little room left for human and infrastructure development. Additionally, it can also increase Pakistan’s dependency on these lending organizations. As a result, it could*enable external forces to use Pakistan for their vested interests.

[ComradePashtun]

Peshawar22,

You are wrong your ministry of finance only last year borrowed around half a billion USD from IMF and was negotiating a further sum not long ago. Your government also borrowed from a Chinese bank on high interest rate this year too. Your economy continue to rely on US grants/aid etc. External sector reels under unceasing CSF reliance - The Express Tribune

I doubt the Pakistani economy will sustain a healthy growth due to sever macroeconomic imbalances and thus the inherent instability but also as per the source of growth too. It could make things very complicated and hopeless if the debt becomes the so called overhang???

[ComradePashtun]

Anyway economic development in Pakistan is Highly uneven between Panjab, to less degree Sindh but with KP and Baluchistan. To make matters worse the CPEC is also diverted from the latter two province.

[logical]

Anyway economic development in Pakistan is Highly uneven between Panjab, to less degree Sindh but with KP and Baluchistan. To make matters worse the CPEC is also diverted from the latter two province.

And Afghanistan is even less developed then Balochistan, wonder why? In Sindh only Karachi is relatively developed, interior sindh because of waderas is poor as Balochistan.

Muhajirs need to spread in Sindh and develop it on par with Karachi. In Pakistan economic development happen on ethnic lines, the more educated ones are more developed. This is why Karachi is best city in Pakistan.