After securing $6 billion in financial assistance from Saudi Arabia to boost Pakistan’s dwindling forex reserves, Imran Khan has gone to another country to seek another bailout package — this time in China. Khan is nothing if not consistent. He told the Saudis that he is “desperate” for help, and pleaded with Xi Jinping that Pakistan is really at a “low point” and in urgent need of funds. The Chinese, though, are a different kettle of fish. Even after spending three days in Beijing, Khan didn’t see the colour of money. What he did get, however, for genuflecting before Emperor Xi is a treatise in iron brotherhood.
Given Pakistan’s dire needs — the country barely has enough foreign exchange to last even two months of imports — the stopgap finance package from Saudis was never going to be enough. With China offering little more than words and promises, it looks increasingly likely that Khan will have to approach the International Monetary Fund for a bailout, a move that is likely to turn the spotlight on Chinese infrastructure projects in Pakistan and the opaque financing around it.
If the IMF puts the CPEC projects under scanner — as it is likely to do when its delegation reaches Islamabad on 7 November and evaluates Pakistan’s debt crisis before loosening the purse strings — there is a possibility that CPEC projects could face some curbs. China doesn’t like this prospect, and it has sounded jittery over IMF scrutinising the terms of Chinese loans for the $62bn China-Pakistan Economic Corridor.
With the US, which holds a large voting share in the IMF, sounding increasingly skeptical about the rationale of a bailout that essentially pays off Chinese loan to Pakistan, pressure has grown on the IMF to do a reality check on China’s expansive infrastructure projects in Pakistan. This has resulted in two countervailing churns over the Belt and Road Initiative.
Khan needs not less than $7.5 billion to mitigate the immediate crisis, but the global lender has, in preliminary talks, made it conditional on “tough decisions”, such as increase in gas and electricity rates, currency depreciation, increase in the central bank’s policy rate, additional taxation measures and structural reforms, according to a report in Dawn.
The IMF has also requested for the CPEC's contract details, which Pakistan has been reluctant to share. The organisation has also warned Islamabad against CPEC’s looming bill. In its latest review of CPEC-related investments, the IMF has noted that “during the investment phase, as the ‘early harvest’ projects proceed, Pakistan will experience a surge in FDI and other external funding inflows.”
To this, China provided the counter churn. It dismissed concerns about CPEC projects and issued a veiled threat to Pakistan that if it follows the IMF's prescription in sharing details of loans or imposing curbs on investments, then bilateral relations could be affected.
At a Chinese foreign ministry briefing held on 15 October, spokesperson Lu Kang said “debt incurred by CPEC only constitutes a very small proportion of Pakistan’s debt composition and it is surely not to blame for the current financial difficulty in Pakistan.” China called upon the IMF to “objectively and professionally” evaluate the situation and added that “relevant measures should not affect the normal bilateral cooperation between China and Pakistan”. It stressed that “choice of the projects and financing arrangements are decided by our two sides through equal-footed consultation.”
What this veiled threat did was lob the ball in Pakistan’s court on courting the IMF and pressurising the Imran Khan administration against agreeing to all of the IMF’s terms and conditions on the bailout package. Pakistan’s reaction was swift. Khan, who until recently was emitting signals on “reviewing” the planned network of roads, railways and energy projects under CPEC promptly declared CPEC to be a “blessing for Pakistan” during his trip to China.
It is in this context that we must see the joint statement where China, instead of delivering the funds that Khan had hoped for, pushed to widen the scope and scale of BRI projects. After signing 16 deals with Pakistan, Chinese vice foreign minister Kong Xuanyou told reporters that “there has been no change in the number of CPEC projects. If there is going to be any change, there will be an increase (in projects) going forward” and “CPEC will be introduced to more areas of Pakistan”.
This note of defiance on BRI is also evident in the joint statement. “The two sides reiterated that BRI represents a win-win model of international cooperation and provides new opportunities for economic rejuvenation and prosperity of all countries,” read the document, adding: “both sides dismissed the growing negative propaganda against CPEC and expressed determination to safeguard the CPEC projects from all threats.”
One way of looking at China’s defiant attitude on BRI is to place it in the context of souring global opinion on Xi’s grand strategy of using infrastructure investments as a geopolitical tool to purchase global heft and shape the world order in accordance with its rise. China is laying a marker that bad press and pushbacks notwithstanding, BRI is here to stay and the world must adjust and accommodate it as it makes space for China.
But the bullish note also carries another hint, one that is exclusively meant for Pakistan. By laying down the ground rules before a prime minister who came begging for funds, China told Khan that CPEC projects are non-negotiable if Pakistan hopes to receive any bailout package. The promise of financial boost is kept alive, but not overtly so.
“The two sides have made it clear in principle that the Chinese government will provide necessary support and assistance to Pakistan in tiding over its current economic difficulties,” Chinese foreign vice-minister Kong Xuanyou told reporters after Khan had a meeting with his counterpart Li Keqiang. “As for specific measures to be taken, the relevant authorities of the two sides will have detailed discussions,” he said.
Tied with the focus on “timely completion of ongoing projects and joint efforts for realisation of its full potential with a focus on social development, job creation and livelihoods and accelerating cooperation in industrial development, industrial parks and agriculture” it indicates a shift in China’s signaling.
What may particularly dismay Khan is that instead of getting any money, he was made to listen to a boatload of sermons. One 'timely' editorial in China's state-controlled Global Times "helpfully" suggested that "Beijing won’t hesitate to aid Pakistan, but efficient use of funds is crucial issue."
It is an unkind cut. Khan didn’t return completely empty-handed though. His travails were rewarded with the reinforcement of the strategic alignment component of the ties, and China issued liberal certificates on Pakistan’s fight against terrorism and its credentials for inclusion in the NSG mechanism.
China’s certificate would have been an excellent example of satirical comedy had it not been for the grave security implications that it holds for India. In one area, however, it serves India well. It reflects the hollowness of New Delhi’s "reset" with Beijing. The Wuhan spirit didn’t take long to fade away.
Updated Date: Nov 05, 2018 18:33 PM