Pakistan’s bailout exposes some flaws in China’s Belt and Road plan

Bloomberg, Oct 11: Pakistan’s government has finally admitted it needs help. Finance minister Asad Umar says he will be meeting officials of the International Monetary Fund on the sidelines of its annual meeting Bali this weekend. There he’ll try and work out the terms for a bailout that would cover a $10 billion hole in Pakistan’s financing needs. The decision has to be a little humiliating for new Pakistani Prime Minister Imran Khan — an anti-Western firebrand who’s had to turn to the West for help just like virtually every other Pakistani leader before him. More importantly, the process is likely to be a window into what’s wrong with China’s globe-spanning Belt and Road infrastructure initiative. On the one hand, this is a familiar situation: Pakistan has had to seek bailouts 10 times since 1990 and still owes money from the last time it needed a handout. Khan was wise to approach the IMF early enough in his tenure that he can blame the previous government and accuse it of mismanagement. Pakistan’s problem isn’t only poor macroeconomic stewardship, however. It’s the deals the preceding administration struck with China. A few years ago, Chinese President Xi Jinping promised to invest $60 billion into Pakistan’s economy. Since then, Pakistanis have hoped Chinese money would fund the power and transport infrastructure that could jump-start growth. Building the China-Pakistan Economic Corridor — often hailed as the most crucial leg of the Belt and Road — has proved to be more expensive than expected. Machinery imports for Chinese projects caused Pakistan’s current account deficit to rise by over 50 percent in the first two years of the CPEC build-out. (Agencies)