Islamabad 4th of September : The International Monetary Fund (IMF) has issued an alarm in the context of China Pakistan Economic Corridor (CPEC) and said that in the early 2022 period new investments could increase the prospect of growth, however, contingent liabilities can could also pose a threat to the sustainability of debt according to the media reports. “In the beginning of 2022 new investments in the China-Pakistan Economic Corridor (CPEC) which was established in 2013 were announced.
While infrastructure in these second-phase investments may increase growth prospects, the potential liabilities can also be a threat to the sustainability of debt,” the IMF stated in its External and Public Debt Sustainability Analysis conducted in conjunction with the Fund staff report that was released following the approval of EFF program for Pakistan, The News reported.
The report says that the debt of Pakistan’s public sector remains viable with robust policies and strong growth, however, with more uncertainties, in part because the fiscal relaxation in FY22H2 did not result in the debt ratio from reducing as planned in the context of the sixth annual review.
The ratio of GDP to debt is expected to increase from 77.9 percent at the end of FY21 to 78.9 percent by the end of FY22 before dropping to about 60 per cent by the end of FY27 in the event that the adjustments in the framework of the EFF program are completed, The News reported.
Around 30 percent of the country’s foreign debt is due to China as well as commercial banks owned by the state, as which is compared with 27 percent in February, as per an assessment published by the International Monetary Fund, Bloomberg reported.
Chinese debt to Pakistan has been increased by $4.6 billion to close to $30 billion the IMF report stated, up from $25.1 billion in February.Chinese support is three times that of IMF debt and is more than the amount provided to either the World Bank or the Asian Development Bank.
The debt shows that China is now playing a similar role to the IMF by providing financing during balance of payments crises, rather than World Bank-style concessionary-project financing.Balance of payments assistance from China continues with the loans made to Pakistan being carried over on an ongoing basis.
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