European economists and experts have concluded that the China-promoted One Belt and Road (OBOR) initiative is nothing else but a debt instrument that can and will drive several nations, including Pakistan towards bankruptcy. China, according to these experts, is charging interest rates as high as 16 percent and above for funding made available for OBOR projects like the China-Pakistan Economic Corridor (CPEC), and cautioned that these loans, which are cumulative, cannot be repaid easily. They are certain that countries like Pakistan, Sri Lanka, Bangladesh and Nepal could be pushed into an endless debt trap. Contrary to the claims made by Prime Minister Nawaz Sharif that the CPEC could emerge as a game changer for the Pakistan economy, there is a worried and concerned perception gaining ground that the project is all and only about boosting Beijing’s position through its Renminbi or Yuan currency. One expert has said that China is competing globally to make the Yuan an alternate currency to the Dollar, and its One Belt One Road (OBOR), in which CPEC is a project, is to play a major role in this. It is a well known fact that Islamabad has border-related differences with India, Afghanistan and Iran, but this has not stopped China from using the influence that it enjoys with Pakistan to raise its investment-related stakes in the country. China has realised that Pakistan is completely dependent on it from a defence point of view, and will now use the proposed CPEC projects to establish itself as an economic behemoth as well in the region, which could eventually push Pakistan into debt. China, one expert, has said, will use the plea that it will sell its goods to Pakistan at higher price due to the risks involved in its proposed investments.
“Pakistan has no opportunity for bidding, it takes whatever China provides and in such a scenario transparency does not exists,” he said. It is also being felt by a majority of these experts that financial transactions linked to the CPEC lack transparency and will not provide the promised job opportunities to the youth, as things produced in industries set up by China would be exported to Pakistan, and thus generate profit for Beijing, not Islamabad. According to one economic estimate, Rs. 60 billion worth of deals happening with Pakistan are tied with the Yuan, and therefore, there is the possibility that trading could happen in Yuan instead of the dollar.
A recent UN Economic and Social Commission for Asia and the Pacific Study (UNESCAP) has sensitised countries in South and Central Asia of the financial risks they could face through China’s OBOR. The UNESCAP report has cautioned that the size of the economy of a recipient country is small compared to the very high risk it faces should it accept or allow Chinese investment to take root. The final end result will be an unsurmountable debt trap for the country involved. According to the UNESCAP report, the USD 46 billion dollar CPEC represents a fifth of Pakistan’s Gross Domestic Product or GDP if not more. Similarly, the report cites the USD 37 billion China-Kazakhstan cooperation agreement signed in late 2014 and early 2015, as another example of Beijing’s debilitating investment impact on smaller economies in the Central Asian region.
The agreement between Bangladesh and China, according to the UNESCAP report, is worth USD 24 billion as of October 2016, which is equivalent to almost 20 percent of Dhaka’s GDP. China has a huge presence in the economic sector in Sri Lanka, and it comes as no surprise that Colombo’s debt exceeds USD 60 billion at present. Of this amount, over ten percent is owed to the Chinese. Colombo has reportedly approached Beijing with a proposal to convert existing debt into equity, thus creating the possibility of China owning several key projects coming up in Sri Lanka in the short as well the long term. According to the UNESCAP study, China has estimated that it will most likely invest about USD four trillion in OBOR-related infrastructure projects. The estimated infrastructure development needs in Asia will cost in the region between USD 1.6 to USD 1.7 trillion annually on average till 2030, according to UNESCAP study. An ambitious China is seeking to turn its currency into a global one, and does not seem to really care about the equally debilitating social or environmental impact its unrestricted money flows into other countries might have.