Sriparna Pathak and Rakshith Shetty
Pakistan President Asif Ali Zardari’s five-day state visit to China, beginning on February 4, underscores the deepening yet fraught dynamics of the relationship. While the visit is framed around reinforcing economic collaboration and security under the China-Pakistan Economic Corridor (CPEC), it occurs against a backdrop of escalating debt stress, stalled infrastructure projects, and persistent threats to Chinese nationals in Pakistan. This moment demands a clear-eyed assessment of whether the partnership can evolve beyond its current transactional inertia to address structural challenges.
Pakistan’s economic reliance on China has reached precarious levels. According to AidData, Pakistan’s external debt to China stood at $68.91 billion as of November 2023, accounting for 22 percent of its total external debt. With total public debt at 74.3 percent of GDP, Islamabad’s fiscal sovereignty is increasingly mortgaged to Beijing. Recent negotiations to reprofile $16 billion in energy sector debt and extend a $4 billion cash loan facility highlight Pakistan’s desperate balancing act: sustaining Chinese investments while avoiding default.
CPEC, once hailed as a game-changer, now exemplifies these contradictions. Launched in 2015, the corridor’s first phase focused on energy and infrastructure. However, delayed projects, cost overruns, and allegations of opaque contracts have eroded its viability. For instance, Pakistan owes $7.5 billion in project debt to CPEC-linked power plants and $2 billion in unpaid bills to Chinese energy firms. As economist Ali Hasanain noted, CPEC’s “original sin” was its reliance on foreign-currency obligations that clash with Pakistan’s domestic fiscal policies, narrowing Islamabad’s economic maneuvering space.
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