Pakistan has continued to be a major beneficiary of development financing from China, ranking as the third-largest recipient globally. These funds have primarily taken the form of loans, with only a small fraction being provided as grants, according to a study conducted by AidData, a research lab based in the United States, covering the period from 2000 to 2021.
Of the total Chinese development finance portfolio of $70.3 billion committed during this period in Pakistan, a mere 8% constituted official development assistance, which includes grants and highly concessional loans, while a significant 89% was categorized as other official sector loans.
One of the prominent initiatives in Sino-Pakistani collaboration is the China-Pakistan Economic Corridor (CPEC), a massive infrastructure and investment project under the broader Belt and Road Initiative (BRI). Launched in 2013 with initial projected investments of over $45 billion, the CPEC has grown to more than $62 billion, with at least $25 billion invested in Pakistan.
Notably, 2017 witnessed the highest financial commitments to Pakistan, totaling $14.0 billion, and this trend persisted even amid economic challenges in subsequent years, including the COVID-19 pandemic. These loans generally have a maturity period of approximately 9.84 years, with a 3.74-year grace period, and an average interest rate of 3.72%.
In terms of sectoral allocation, the energy sector received the most significant share of funding from 2000 to 2021, accounting for 40% (equivalent to $28.4 billion) of the Chinese development finance portfolio. General budget support and transportation and storage sectors followed with 30% ($21.3 billion) and 14% ($9.7 billion), respectively. During the Belt and Road Initiative era from 2014 to 2021, the top sectors were transportation and storage (13%, $7.2 billion), general budget support (30%, $16.08 billion), and energy (43%, $23.29 billion).
The enduring partnership between Pakistan and China has spanned a decade, providing essential support to Pakistan in various economic challenges. However, it is crucial to acknowledge that the accumulation of Chinese loans, coupled with Pakistan’s management, has led to a mounting debt burden for Pakistan.