National and International

China’s economic corridor is pushing Pakistan towards an economic nightmare

There is a fairy tale story that said Islamabad behind the yellow brick of the economic corridor between China and Pakistan (CPEC), which finds prosperity in the embrace of Beijing.

The plot indicates that Chinese funds flow to Pakistan and help modernize Pakistan’s infrastructure; This, in turn, is the beginning of a boom period for the national economy of Pakistan, part of which stems from the ability to export more.

Although Pakistan’s external debt and even the current account deficit can increase significantly for the first time since the capital and the Chinese mechanism, all this will be an investment in capacity-building and provide future returns that will outweigh The down payment.

Trade figures for the first half of 2016 show that imports from China to Pakistan increased by almost 30%. This reflects a huge generator of impulse power supplies, construction equipment and mining and machinery – more or less than would be expected from the previous scenario.

However, there was an 8% decline in Pakistan’s exports to China – a surprise given improved transport connections between the two countries. Islamabad publicly accused Pakistan’s export barriers that Beijing has launched and a free trade agreement with Pakistan, questioning Beijing’s motives in building the corridor.

Chinese imports have contributed to an increase in Pakistan’s trade deficit: the increase was up to 77.34% in March, the year of the year. Worse still, Pakistan’s current account deficit has increased by 121% between July and February.

Pakistan is moving towards a current account deficit as a percentage of GDP, or twice that of India. The deficit is also remarkable given the billions of Chinese investment assumed that it would enter the country with the broker.

In fact, FDI in Pakistan over the same eight-month period was less than $ 1.3 billion, noting the corridor is financed through debt or through intra-China transfers.

Some Pakistani economists are already worried about what this might mean. Estimates show that Pakistan will have to pay $ 90 billion in China over the next 30 years because of the corridor.

It is not impossible, as Pakistan attracts capital and exports more during this time. The current export figures and FDI, however, show no evidence.

So far, the benefits seem to accumulate only on the balance side of Beijing. If this trend continues as CPEC grows and develops, the tale Pakistan can slowly become a horror film.

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