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Analyse the implication of bilateral ‘debt-trap’ situation of Pakistan vis-à-vis the Chinese Economy.

(3 Marks)

Answer

China has become famous for its ‘Debt Trap Diplomacy’ in recent times. Under this China provides financial and technical expertise/assistance to help various nations to bring them under its direct or indirect influence.

The first and the foremost implication of the diplomacy is that Beijing has now become Islamabad’s largest creditor. According to documents released by Pakistan’s finance ministry, its total public external debt stood at $44.35 billion in June 2013, just 9.3 percent of which was owed to China. By April 2021, this external debt had ballooned to $90.12 billion, with Pakistan owing 27.4 percent —$24.7 billion — of its total external debt to China, according to the IMF.

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Transcript

Analyse the implication of bilateral ‘debt-trap’ situation of Pakistan vis-à-vis the Chinese Economy. (3 Marks) Answer China has become famous for its ‘Debt Trap Diplomacy’ in recent times. Under this China provides financial and technical expertise/assistance to help various nations to bring them under its direct or indirect influence. The first and the foremost implication of the diplomacy is that Beijing has now become Islamabad’s largest creditor. According to documents released by Pakistan’s finance ministry, its total public external debt stood at $44.35 billion in June 2013, just 9.3 percent of which was owed to China. By April 2021, this external debt had ballooned to $90.12 billion, with Pakistan owing 27.4 percent —$24.7 billion — of its total external debt to China, according to the IMF.

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CA Maninder Singh is a Chartered Accountant for the past 13 years and a teacher from the past 17 years. He teaches Science, Economics, Accounting and English at Teachoo