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Pakistan has been going through an acute economic crisis, with the value of the Pakistani Rupee hitting all-time low against the US Dollar. In spite of knowing the current financial condition of Pakistan, China and Saudi Arabia recently informed Islamabad that the latter would have to repay the debt of USD 77.5 billion (to Beijing and Riyadh) between April 2023 and June 2026.

In a report published on April 6, 2023, United States Institute of Peace (USIP) warned Pakistan, stating that it would be quite difficult for the debt-ridden South Asian nation to repay large sums owed to Chinese financial institutions, private lenders and Saudi Arabia over the next three years. According to the USIP report, Islamabad cannot repay the amount mainly because of skyrocketing inflation, domestic political turmoil and terrorism. The USIP further mentioned that China and Saudi Arabia might take drastic actions against Pakistan, if the latter failed to repay the debt during the stipulated time frame. Meanwhile, Pakistan is optimistic that China would extend the period of repayment.

Mian Muhammad Shehbaz Sharif, the Prime Minister of Pakistan, approached the International Monetary Fund (IMF) for financial help in 2022. Although the IMF grant was due in November 2022, the Government of Pakistan is still making serious efforts to fulfill all the conditions set by the global lender to get the loan. Islamabad had signed an agreement with the IMF in 2019, and it would expire on June 30, 2023. Now, the Shehbaz Sharif Administration continues to negotiate with the Fund in order to extend the term of this agreement. So far, either side is yet to reach a final decision in this regard.

Meanwhile, Dr Musadik Masood Malik, the Pakistani Minister of State for Petroleum, has claimed that it will not be possible for the Government to provide all the citizens with gas facilities. As the followers of Islam are observing Ramadan (a month of fasting that began on March 23, 2023) worldwide, demand for cooking gas has increased in Pakistan. However, the country is facing a gas crisis. Electricity blackout for long hours has also become a common phenomenon. The situation has particularly worsened in the port city of Karachi. In such a scenario, the minister announced that 24 hours gas supply to common people would not be possible.

According to Dr Malik, the decrease in supply compared to the demand has triggered the gas crisis. Talking to the local media in Karachi, he stressed that the Government would soon introduce two Gas Bills, one for the rich and one for the poor, in the National Assembly, indicating that the rich people would have to purchase gas at a higher price.

Pakistan relies heavily on natural gas to run various industries. However, the Government is unable to import natural gas like before due to the economic crisis. It has started to have an impact on heavy and medium industries in Karachi. Dr Malik stated that he arrived in Karachi to meet the industrialists. He admitted that the Karachi Chamber of Commerce and Industry urged the Shehbaz Sharif Government to sort out the issue immediately. Later, he assured people that the Government would try its best to provide as much gas as possible to households during Ramadan. At the same time, he made it clear that it would not be possible for the Government to supply gas throughout the week.

The Trap
Western financial research organisations have claimed that China has surpassed the World Bank (WB), the IMF and the US in providing rescue loans to the Underdeveloped and Developing nations. According to those organisations, the Asian giant sanctioned 128 such loans for 22 countries, or a total of around USD 3,336 million, from 2008 to 2021. China’s influence as a lender, especially during crisis periods or as a last-minute saviour, has expanded globally in recent times.

Beijing has given loans to countries situated in Southeast Asia, Latin America, the Caribbean region, and sub-Saharan Africa. Pakistan, Sri Lanka, Laos, Kyrgyzstan, Mongolia, Argentina, Egypt, Zambia, Ghana and many other countries have received loans from China so far. Interestingly, more than 40 countries owe more than 10% of their GDP to China, while some countries owe more than 20%. Furthermore, China’s interest rates are two-four times higher than those of the IMF, the WB, France or Germany; and the repayment period is much shorter. When low- or middle-income countries fail to repay their debt on time, Beijing lends more to help them pay off previous debt. According to experts, this cycle is ever-revolving, but invariable. Chinese projects are underway in major infrastructure sectors, such as ports, highways, railways, mines, telecom, etc., in these countries with the help of loans provided by Beijing. Here lies the trap, as China takes control of these projects, if those countries fail to repay loans on time. For instance, Sri Lanka had no other option, but to hand over a 70% stake in the Hambantota port project to the Chinese investors in 2017.

Several Western countries, including Britain, have been claiming for long that providing loans is actually a part of China’s debt-trap policy. China has started using debt, an important part of the financial system and economy, as a geopolitical, as well as a diplomatic, weapon. Experts are of the opinion that the entire process of lending money by China is not at all transparent. It is also a corrupt process, as there are allegations of Labour and Human Rights violations in Chinese projects. Many of these projects are not environmentally-friendly, as well. Unfortunately, the victims of China’s debt-trap diplomacy cannot take any action against Beijing due to their dependency on Chinese fundings. This way, China has strengthened its political influence in different parts of the globe by taking advantage of the poor economic condition of various countries. No wonder, the Asian powerhouse shall take no time to show its military might, if a situation arises.

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