Pakistan’s tenuous economic situation is opening the door to foreign competition in the country. Since Islamabad signed on with the China-Pakistan Economic Corridor, the largest project in Beijing’s expansive Belt and Road Initiative, China has spent billions of dollars on the endeavor. And the financing comes with plenty of strings attached. Sri Lanka, for example, had to concede control of Hambantota port, another Belt and Road production, to a state-owned Chinese firm after failing to repay what it owed for the project. Though Pakistan hopes to avoid the same fate, doing so won’t be easy. To fend off downward pressure on its currency, the rupee – which has lost 15 percent of its value this year – Pakistan has had to dip into the foreign exchange reserves it needs to service its mounting obligations. The country, facing a balance of payments crisis, seemed to have no choice but to borrow even more money from Beijing or solicit yet another bailout (its 12th since the 1980s)
Saudi Investment in Pakistan Could Yield Global Returns
The deal could pay dividends for both parties, as well as the U.S., while costing Iran and China.