How Chinese loans trapped Pakistan's economy – DW – 08/02/2024
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As Pakistan works on enacting economic reforms under a new multibillion-dollar IMF bailout, Islamabad must first figure out what to do with its mountain of debt owed to China.

As Pakistan works on enacting economic reforms under a new multibillion-dollar IMF bailout, Islamabad must first figure out what to do with its mountain of debt owed to China.

After cash-strapped Pakistan secured a new $7 billion (€6.5 billion) bailout package from the International Monetary Fund (IMF) in July, Islamabad has started talks with Beijing on reprofiling billions in Chinese debt as it seeks to enact economic reforms.

On the table are proposals to delay at least $16 billion in energy sector debt to China, along with extending the term of a $4 billion cash loan facility due to depleting foreign exchange reserves.

…

Analysts say that the CPEC loans were initially presented as the cheapest option for international loans, but it later emerged that they would be far more expensive to pay back than expected.

“The agreements, heavily favoring China, were poorly negotiated, resulting in the project being over-promised and under-delivered. The public and media were misled by the then minister of planning and his team to portray CPEC as a significant economic game-changer for Pakistan and the region,” Khalid said.

  • Lost_My_Mind@lemmy.worldEnglish
    314·
    3 months ago

    Why would Pakistan pay? America is billions of dollars in debt, and has never once made an attempt to actually pay its debts.

    China would have to invade Pakistan, and that would lead to a whole shitstorm of other nations getting involved.

    So why even attempt to pay?

    • Buffalox@lemmy.worldEnglish
      142·
      3 months ago

      America is billions of dollars in debt, and has never once made an attempt to actually pay its debts.

      This is false, USA is always paying debt in full and on time, which is why it can continue to borrow cheap.

      What you are probably thinking of, is that USA should stop taking on new debt. But since they don’t have to stop, why should they?
      The huge difference between USA and a struggling economy like Pakistan, is that Pakistan risk they can’t take on new debt, or if they can, it’s very expensive. Not being able to borrow what they need to run the economy, will cause a major slowdown of the economy, or said in terms that focus more on human consequences, it will cause vastly increased poverty in Pakistan, because any crisis always hit the poor the hardest.

      The two are in no way comparable.