IMF on CPEC

In a concluding note to Pakistan for the US$6.15 Billion three-year programme the International Monetary Fund (IMF), has presented an objective macro-economic review of the CPEC-related investments. As the projects start to come on-stream and the Chinese investors start to repatriate profits, there would be significant pressure from CPEC-related outflows.

This would be on top of the burden in the form of loan obligation repayments for these projects, which will continue to rise post-2021. In the face of declining exports, potentially reduced remittances, and the financial burden from existing (and growing) debt, the CPEC costs could place heavy demands on the economy.

The expected CPEC-related growth in the economy, would help partially off-set the payments in the long run, however, the Fund acknowledges: “Reaping the full potential benefits of CPEC will require forceful pro-growth and export-supporting reforms.” There is a clear need for improving the business climate, governance structures, and the security situation as pre-requisites for the CPEC-related investments. The Fund has cited the CPEC-related outflows as one of the medium- to long-term risks facing Pakistan, and has called for “sound project evaluation and prioritization mechanisms based on effective cost-benefit analysis and realistic forecasts of macroeconomic and financing conditions” to mitigate potential risks. The need for “transparency and accountability in project management and monitoring,” has been emphasized, particularly for the Power Purchase Agreements (PPA) with the Chinese Independent Power Producers (IPPs).

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