Pak has external debt problem and its date with China is proving expensive

We’re about two months away from elections in Pakistan -- elections that are almost certain to be shrouded in controversy, one way or another. And, worryingly for Pakistan, it appears that the economy is weakening, just in time for the instability that might follow from the country’s turbulent politics.

Under the outgoing government -- led till last April by Nawaz Sharif, three times prime minister -- the economy had appeared to be doing well. In fact, a new energy seemed to have infused Pakistan’s entrepreneurs and investors; in the last fiscal year, the economy grew at 5.8 per cent, the fastest rate in 13 years.

That now appears set to change. Economists polled by Bloomberg worry that, in the coming year, growth will slow to 5.2 per cent -- a full percentage point below the government’s own optimistic forecast.

The problem is that much growth in the recent past has been unbalanced, depending particularly on investment from China in the China-Pakistan Economic Corridor (CPEC) -- a branch of Chinese President Xi Jinping’s world-spanning Belt and Road Initiative -- and on Pakistani government spending that matches the CPEC’s aims. China’s big bet on Pakistan’s infrastructure has to be paid for somehow, in part through the purchase of Chinese heavy engineering and other inputs.