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IMF Cautions Pakistan About China Investments over Repayment Fears

By | Oct 19, 2016 11:20 AM EDT
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The International Monetary Fund (IMF) sounded a note of caution to Pakistan about growing Chinese investments in the country.

Pakistan is participating in $46 billion economic corridor project.(Photo : https://pixabay.com/en/life-beauty-scene-transport-863180/)

The International Monetary Fund (IMF) sent a warning to Pakistan about the growing Chinese investments in the country.

While investments are expected to help the ailing Pakistani economy in realizing its potential, the country may possibly face difficulties in meeting its repayment obligations. Pakistan is participating in $46 billion economic corridor project.

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In its evaluation of China Pakistan Economic Corridor (CPEC) investments, IMF said the growth projected for the investments is likely to be strong enough to cover the repayments over the longer term. However, it also noted that such repayment is not guaranteed.

IMT added that it is important that such investments are coupled with export and growth-related reforms in the country to ensure the country's repayment capacity.

According to the report, CPEC-related imports are expected to touch 11 percent of total forecasted imports by 2020. The gross external funding needs of Pakistan, though, are likely to jump by 60 percent by then, reaching $17.5 billion.

The report advised Pakistan to manage its CPEC-related outflow properly. Accordingly, this is important in the scenarios when Chinese investors start to repatriate the profits from their investments in Pakistan.

IMF further stated that owing to the massive amount of Foreign Direct Investment involved, the repatriation can run into huge amounts, as Pakistan needs to manage the outflows in the form of loan repayments.

Furthermore, IMF said Pakistan's growth rate may increase, touching five percent in the current fiscal year. The report also lauded the investment's potential with a huge chunk of the inflow going towards transportation, energy and infrastructure projects. It is expected that nearly $10 billion worth of investments are allocated for road, rail and port developments. 

 

 

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