ISLAMABAD: According to a report, Pakistan is the third-largest recipient of Chinese development finance worldwide, with a portfolio totaling $70.3 billion. This financing primarily consists of loans, with only two percent in the form of grants, covering the period from 2000 to 2021.
The loans from China to Pakistan had an average interest rate of 3.72 percent, an average maturity period of 9.84 years, and a grace period of 3.74 years. The largest sector to receive Chinese development finance during this period was energy, accounting for 40 percent or $28.4 billion of the total portfolio. General budget support (30 percent or $21.3 billion) and transport and storage (14 percent or $9.7 billion) were the next major sectors receiving Chinese financing.
Pakistan’s energy portfolio, at $28.4 billion, was the largest in the world, with Angola and Vietnam as the second and third largest recipients of Chinese development finance in the energy sector. Pakistan’s energy portfolio represented 10.2 percent of China’s global energy portfolio across multiple countries.
When analyzing the distribution of Chinese development finance by different administrations in Pakistan, the PML-N government (2013-2017) attracted the highest amount, totaling $36.2 billion over the 21-year period. The PTI government received $19.6 billion, the PPP government received $10.4 billion, and the Musharraf government received $4.1 billion.
The top sector receiving development finance under the PML-N government was the energy sector (52.8 percent), while “general budget support” remained the primary recipient under the PTI government, accounting for 61.3 percent of the flows.
China has been Pakistan’s largest foreign development financing provider since 2012, surpassing the United States in terms of funding by a significant margin.
According to the data, 82 percent of the projects committed until 2021 had been completed, with another 13 percent still under implementation.
Pakistan had a significant amount of public debt exposure to China, totaling $67.2 billion, which is 19.6 percent of its GDP. In recent years, a larger proportion of Chinese development finance has been in the form of rescue loans rather than developmental projects. The post-2017 years also witnessed an increase in roll-overs and the matching or exceeding of new loan commitments since 2019.
Out of 127 infrastructure projects worth $38.8 billion, only three projects with a total value of $452 million had been suspended or canceled as of the report’s findings. More than half (52 percent) of the infrastructure projects were associated with Environmental, Social, and Governance (ESG) risks, with the energy sector facing the greatest ESG challenges, affecting 51 percent of the portfolio. Only a quarter of these projects had strong ESG safeguards in place, with higher percentages of projects facing environmental and governance risks. Additionally, 46 percent of these projects faced social risks such as labor violations or community protests.
