China-Pakistan Economic Corridor, CPEC a mega project that is expected to change the future of Pakistan. The project will back the economy of the country after when we’d have paid $90 Billion to China over a span of 30 years. This money will be paid as the debt for the loan and investment portfolio worth $50 Billion.
As more and more projects are being added to CPEC, the amount of debt is increasing. It is now approximately $54 Billion after the addition of investment in Pakistan Railway and Karachi’s Circular Railway project. And so will the amount of return will increase. The infrastructure and the power projects that are a part of CPEC are expected to be completed till 2030. The economic experts say that till 2020, Pakistan will have to pay $3-4 Billion per year to China as the return value of debt.
CPEC is creating a lot of local jobs that can help a vast segment of Pakistan’s population but another concern is arising. The projects mostly have foreign investment. Because of that Pakistan has a very low circulation of foreign exchange. Only 25% of foreign exchange is expected to come in part of Pakistan. The repayment amount is still manageable from the foreign exchange and the resulting exports of the goods from CPEC.
CPEC is expected to make a total growth of 5% in the trade. The expected growth in the exports is 4.5% until the year 2020. This growth is higher than the growth in last ten years which was 3%. The expected growth in imports is 4-4.5 % until the year 2020. This growth will be the result of an increase in GDP because of CPEC.
Account deficit situation
The current account deficit (CAD) of Pakistan in starting months of the year 2017 was much higher than was expected. It is $4.7 Billion which is 88% higher than the year 2016. The main reason behind this increase was the poor performance in exports that were just of $13 Billion. While the imports increased by 9% that were of $25.5 Billion. The forecast of next year’s CAD despite the projects of CPEC is being revised. The exports have to be made better; otherwise, Pakistan will earn much less profit from CPEC. It will just end up paying another round of debts.