“This prime minister and his team seem serious about focusing on Pakistan’s economy, and moving beyond superficial economic management to deeper reforms, given that they have engaged some prominent Pakistani economists to help them out,” Madiha Afzal, an assistant professor at the University of Maryland’s School of Public Policy and a non-resident fellow at the Brookings Institution, told DW. “Some of their rhetoric and actions, however, are markedly superficial, which does not bolster confidence in their approach,” she added.
To combat the economic woes, many Pakistanis seem to be expecting help from their ally China, often called an “all-weather friend” to Pakistan due to the two sides’ close political, economic and military ties as well as aligning strategic interests. But it is unclear how generous Beijing will be in helping its strategic partner weather the current economic storm.
Many inside and outside Pakistan also partly blame China for the troubles afflicting the Pakistani economy. They argue that the deteriorating balance of payments is a result of higher import spending by Pakistan on materials from China for the China-Pakistan Economic Corridor (CPEC) project.
CPEC is a Chinese-led series of ambitious transport and energy projects to build infrastructure in Pakistan that some estimate at over $60 billion. It forms part of Beijing’s wider Belt and Road Initiative (BRI).
As part of CPEC, China provides loans to Pakistan, which imports equipment and services from China. This adds to Pakistan’s debt and worsens the current account deficit.
If investments are sound, CPEC has the potential to boost the Pakistani economy. But observers say the terms and conditions of much of the Chinese lending are opaque, and interest rates on some loans may be higher than Pakistan can afford.