Threats to Pakistan’s economy and CPEC

Izaz Arshad

Thinking of a country’s prosperity without a strong economy is a blasphemy. Unfortunately Pakistan is facing a lot of hurdles regarding its economy. Some of them are: The prices of the oil in the international market are increasing rapidly in the past few months. This leads to a huge burden on the oil importing country like Pakistan. Trade deficit mean, the negative difference between exports and imports. Pakistan has more imports than the exports and that’s why we have trade deficits.

Another hurdle to the Pakistan’s economy which should be discussed is the massive burden of the foreign loans in order to overcome the trade deficit. On these loans we are paying a huge amount of interest to international banks like World Bank, IMF and Asian Development Bank. As the currency of Pakistan is not dollar, the fluctuation in dollar as well as in rupee is in majority of cases leading Pakistan to a loss in the wealth. Similarly for an economy to be stable, a country must have a peaceful environment and unfortunately Pakistan is in deep crises regarding this issue.

Since 2007 various kinds of terrorist activities and uncontrollable anarchy is a big challenge for the foreign investors. Political situation which is very unstable is also hitting Pakistan’s economy very badly, because in a country where the political turmoil is at peak no longer can have a stable economic position. It frustrates the investors badly.

The lack of source of energy is not allowing our country’s economy to grow at required rate as without it, the industrial sector cannot be enhanced.

Along with all the above discussed threats to the economy of Pakistan, we cannot ignore the alarming threat of corruption which is present in almost all the sectors of Pakistan is continuously weakening our economy.

Due to the mentioned threats of terrorism, corruption and energy supply, Pakistan is not an attractive magnet for international investors. If the project of CPEC is fully operational, due to the low labour costs, a great and smooth supply of labour in terms of number and skills and the fact that we are a low tax regime, Pakistan could be one of the most attractive market for both national and international investment funds and markets. If all the planned projects are implemented, the value of those projects would exceed all foreign direct investment in Pakistan since 1970 and would be equivalent to 17% of Pakistan’s 2015 gross domestic product.

It is further estimated the CPEC project will create some 700,00 during the period 2015-2030 and add up to 2.5 percentage points to the country’s growth rate. If all goes well and on schedule, of the 21 agreements on energy- including gas, coal and solar energy- 14 will be able to provide up to 10,400 megawatts (MW) of energy by March 2018. According to China Daily, these projects would provide up to 16,400 MW of energy altogether.

Oil from the Middle East could be offloaded at Gwadar and transported to China through the corridor, cutting the current 12,000 km journey to 2,395 km. It will act as a bridge for the new Maritime Silk Route that envisages linking 3 billion people in Asia, Africa and Europe, part of a trans-Eurasian project. When fully operational, Gwadar will promote the economic development of Pakistan and become a gateway for Central Asian countries, including Afghanistan, Uzbekistan, linking Sri Lanka, Iran and Xinjiang to undertake marine transport. Over $33 billion worth of energy infrastructure will be constructed by private consortia to help alleviate Pakistan’s chronic energy shortages, which regularly amount to over 4,500MW, and have shed an estimated 2-2.5% off Pakistan’s annual GDP. With approximately $33 billion expected to be invested in energy sector projects, power generation assumes an important role in the CPEC project.

Over 10,400MW of energy generating capacity is to be developed between 2018 and 2020 as part of the corridor’s fast-tracked “Early Harvest” projects. In short words, if all the things went right and if there we didn’t face any national or international problems regarding the one built one route (CPEC), fruitful results will be assured which will surely make the economy of Pakistan healthy and prosperous.