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After Sri Lankan economy collapses, concerns grow in Pakistan over Chinese debt trap


April 24, 2022 1:59 p.m. STI

Islamabad [Pakistan]Apr 24 (ANI): Learning lessons from the collapse of the Chinese-dominated economies of Sri Lanka and Nepal, the Shehbaz Sharif government has decided to abolish the China-Pakistan Economic Corridor Authority (CPECA) to stop the clean Pakistan’s slide towards a similar fate.
The authority, dominated by the Pakistani army, will now be restructured and integrated into the Ministry of Planning and Development. With this decision, the new government took over the development of economic policy from the army. The military dominated economic policies under the government of Imran Khan and authority was part of the game of domination.
The immediate provocation of the decision appears to be the Chinese shutting down more than 37% of the installed capacity of CPEC power projects, or 1,980 megawatts, due to non-payment of dues to Chinese investors. The three imported coal-fired power plants, Hubco, Sahiwal and Port Qasim have shut down one of their two units due to unavailability of fuel.
The Chinese had been angry with the former government of Imran Khan for the increasing dues. So even after the government made a partial payment of Rs 50 billion, Chinese companies decided to reduce the operation of power plants to force the government to make the payment of more than Rs 200 billion.
The Chinese are also angry with Pakistan for delaying the establishment of a pending revolving account since signing the CPEC Power Projects Framework Agreement in 2014.

However, the new PML-N-led coalition government opposed the authority when it was first mooted by the military in 2016. Then-Prime Minister Nawaz Sharif had categorically rejected the idea. It was felt to be a shrewd way for the military to dominate economic policy-making. This decision was violently opposed by parliamentarians in 2019 when the government of Imran Khan passed an ordinance to create the authority. The authority was headed by a former Lieutenant General Asim Bajwa who had to resign over corruption in 2020.
Since then, opposition to the authority has grown as it only created coordination and accountability problems with multiple ministries. Since the primary responsibility for project execution was given to ministries, a parallel organization like CPEC only created duplication of work and lack of ownership.
The new Minister of Planning, Development and Special Initiatives, Ahsan Iqbal, has indeed pointed out that projects worth more than 29 billion dollars of investments have been successfully channeled through the Planning Commission without any authority.
He pointed out that Imran Khan’s government, despite the authority, had not completed critical projects by the dates agreed between the Chinese side and the PML-N government. Of the nine Special Economic Zones (SEZs), the PTI government has only been able to start work on four of them. These SEZs were expected to attract foreign investment of around USD 40 billion.
The decision of the new government is also motivated by the pitfalls of Chinese dominance of economic policies. The economic collapse of Chinese-dominated economies like Sri Lanka and Nepal only made such a decision imperative and urgent for an economy that was on the brink of a free fall. (ANI)