Pakistan in 'Belt and Road Debt Trap' Requests Bailout from China

[Asia Economy Reporter Yujin Cho] Pakistan, burdened with debt after pursuing China-led Belt and Road (land and maritime Silk Road) infrastructure projects, is pushing to request debt relief from China.

According to Bloomberg on the 9th (local time), the Pakistani government plans to propose a debt restructuring request to the Chinese government, asking for eased repayment terms related to 12 power plant projects.

Over the past eight years, Pakistan has borrowed funds from China to build power plants, but as the debt has grown to an unmanageable level, it has faced difficulties including applying for IMF bailout funds.

The power generation capacity has increased excessively, forcing the government to provide subsidies even when facilities are not operational, which is exacerbating the debt crisis.

The Belt and Road policy, under which the Chinese government provides loans for construction and Chinese companies participate in the projects to take these costs, leaving surplus facilities and high-interest debt to the participating countries, has been criticized by the United States as a debt trap.

With joint infrastructure projects under the China-Pakistan Economic Corridor (CPEC), Pakistan's external debt had risen to $74 billion (approximately 82 trillion KRW) as of the end of 2019, and the fiscal burden has increased further due to the COVID-19 pandemic last year.

Meanwhile, a spokesperson for the Chinese Ministry of Foreign Affairs stated that they are unaware of Pakistan's plan to request debt relief. The spokesperson said, "The power plant projects provide Pakistan with stable and affordable electricity in large quantities," adding, "Energy cooperation between the two countries has proceeded smoothly, bringing economic and social benefits."

This content was produced with the assistance of AI translation services.