Pakistanis were jumping like inebriated monkeys all over internet telling everybody the Chinese 'investments'. According to latest report Pakistan will have to pay $40 billion to China in 20 years in shape of repayments of debt and dividends on a $26.5 billion investment.
Atleast now the Pakistanis will understand it was debt, not investment.
ISLAMABAD: Pakistan will pay $40 billion to China in 20 years in shape of repayments of debt and dividends on a $26.5 billion investment under flagship China-Pakistan Economic Corridor (CPEC), documents of the Ministry of Planning and Development reveal.
Out of $39.83 billion – to be precise – the debt repayments of energy and infrastructure projects amount to $28.43 billion. The rest of $11.4 billion will be paid in shape of dividends to the investors, showed the official estimates.
This suggests that unlike the claims of $50 billion to $62 billion CPEC investment, the actual investment likely to remain half of the initially announced investment figures.
The government loans of $5.9 billion have been signed at an interest rate ranging from 2% to as high as 5.2%. There are three government loans totaling $774 million that have been obtained at 5.2% rate.
However, Pakistan can only sustain these repayments by enhancing its exports. In case the country still remains unable to increase exports despite removal of energy bottlenecks, it will be difficult to manage these repayments.
Assuming that Pakistan-IMF three-year relation will begin from fiscal year 2019-20, the country will repay $4.2 billion to China during this period on account of debt and dividend payments.
In the next fiscal year, Pakistan will return $1 billion to China that will reach to $1.9 billion during the last year of the IMF programme. The CPEC repayments will peak to $3.23 billion in 2025-26 and from that year it will start reducing and ending at $306 million in 2037-38, according to the documents.
Chinese don't believe in any free rides. Earlier a Chinese politician made a statement that "CPEC is not a gift". Pakistan should have taken that statement seriously.
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