China’s bailout loan to Pakistan has raised concerns among experts, as it may lead to a debt trap situation similar to what Sri Lanka experienced with Chinese loans. According to reports, China has been practising “debt-trap” diplomacy, where it extends loans to countries that they are unlikely to pay back, and then uses the default as leverage to extract strategic or economic concessions from them.
Pakistan’s debt to China stands at a staggering $23.7 billion, with a large chunk of it owed by Pakistan’s state-owned companies to Chinese lenders. China’s loans to Pakistan are part of its Belt and Road Initiative (BRI), which aims to build infrastructure and connectivity across Asia and Europe. However, concerns have been raised about the sustainability of the loans and the impact they may have on Pakistan’s economy.
Experts warn that Pakistan’s heavy reliance on Chinese loans may lead to a debt trap situation, where it may not be able to repay its debts and will be forced to give up strategic assets or resources to China. China has a history of taking control of strategic assets, such as ports and airports, when countries fail to repay their loans.
For instance, in 2017, Sri Lanka handed over control of its Hambantota Port to China on a 99-year lease after it was unable to repay its debts to Chinese lenders. The transfer sparked concerns among Sri Lankans about the country’s sovereignty and security. China has been accused of taking over strategic assets in other countries when they fail to repay their loans. Another example is in 2019 when China took over the control of Sri Lanka’s Mattala Rajapaksa International Airport, which was built with Chinese loans after Sri Lanka failed to repay its debts.
Pakistan’s economic situation has been precarious in recent years, with the country facing high inflation, low economic growth, and rising unemployment. Furthermore, Pakistan’s current account deficit has widened, and its foreign reserves have fallen to critically low levels, making it increasingly difficult to repay its external debts, including those owed to China. Moreover, the country’s ability to repay its loans may be further impacted by its political instability, security challenges, and deteriorating economic situation.
China’s bailout loan to Pakistan may pose significant risks to Pakistan’s economy and may lead to a debt trap situation. Pakistan must exercise caution in accepting Chinese loans and consider the long-term implications of such loans on its economy and strategic assets. Furthermore, it should focus on increasing its exports and attracting foreign investment to reduce its dependence on foreign loans.