In an interview that State Bank of Pakistan (SBP) governor Ashraf Mahmood Wathra gave to a foreign news agency on 4th December, 2015, he was reported in a way that created an unfortunate impression as if the Governor is apprehensive of the China-Pakistan Economic Corridor (CPEC). To be more specific, parts of his statement were: "[w]e have CPEC in the limelight now - with debt, some equity would also come - CPEC needs to be more transparent - we need to share the blueprint of the project with all and sundry so that people could find their roles in that greater plan - I don't know out of 46 billion dollars how much is debt, how much is equity and how much is in kind - where the investor would only sell his machine, that will convert into a kind of debt with no inflows and in the longer run we have to make sure that we have more capacity to export which most likely CPEC will itself be generating. There is a plan to have industrial estates alongside this major route and these are going to be export oriented but we need to see this plan with more clarity". While being supportive of the CPEC, the Governor SBP is asking for going into it with our eyes wide open. He said: "[the] CPEC is one of the most important initiatives of the government in recent times that is expected to play a significant role in accelerating economic growth of the country, going forward." The State Bank is fully aware of broader contours of this initiative unfolded so far, and has "full confidence in its potential to play the role of a game changer for the country."
Why should the government hold all cards close to its chest particularly when SBP has to pay off the debt? The central bank, therefore, has every right to have access to full information in relation to the financial implications of the mega development deal. The CPEC, from the very beginning, has been projected by the government as a game changer and wants all others to see and publicise it that way although it is hard to sell this story to doubting Thomases. Nobody could believe that China is undertaking the project just for the prosperity of Pakistan and has no self-interest. It would hand over $46 billion to the Pakistani government free of cost, expecting no repayment and with no strings attached but the government continues to portray the deal as its biggest achievement which would usher in an era of unprecedented economic and social development, bringing the country one step closer to the elite club of developed economies. The reality could, nonetheless, be different because no other country would help you graduate to the developed club of countries and one has to earn such a place through sheer sacrifices, hard work, right policies and perseverance. Seen objectively, the Governor SBP, in his first interaction on the subject has raised some pertinent and relevant questions about the CPEC because the inflow of support in the form of debt, equity or the provision of machinery and investment goods would have different implications for the economy of the country. It is also very easy to see that the level of debt servicing and the impact on balance of payments would be different in each case. Besides, the project would not yield the desired results if exports of the country do not increase commensurately. As the details of the CPEC are as yet sketchy, everybody has the right to ask questions about various aspects of the project. The CPEC is a very long-term project and so many things could change in between now and its completion. Therefore, SBP needs to be fully taken on board about the details of the project since it could have a lot of implications about monetary policy and reserve management of the country during and after the implementation of the project. Let us all support CPEC. However, first we need to do our part including funding required for it in local currency and provide security to our Chinese friends involved in it.
Lastly, the success of the project would crucially depend on the continuous close cooperation between the governments of China and Pakistan. Even a layman knows that relations between governments depend on the commonalities of interests and these could change with time. It is increasingly clear that China, through the CPEC, is expending its energies and resources to also develop western China and address Beijing's certain geo-strategic goals or interests in the region and beyond. Here, one must not lose sight of the fact that it was during the latter period of the Sino-Soviet split that China had set three pre-conditions for the Soviet leadership - Leonid Brezhnev, Yuri Andropov, Konstantin Chernenko and Mikhail Gorbachev - between 1982 and 1985 in order to normalize Sino-China relationship. One of these requirements was the pull-out of Soviet troops from Afghanistan. Wasn't that a clear case of convergence of interests?