Sri Lanka debt and CPEC

[illusion8]

Fiscal spending in terms of infrastructure spending have a multiplier effect, they spur economic growth.

China and India are on extreme ends when it comes to infrastructure spending. While Chinese spending on roads and power exploded since late 1990s, India stagnated. India not only spent less (focusing on expanding their services sector), but were highly inefficient too.

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Those are old statistics..10-15 years old.

Here's the latest one.

2016 - India's Infrastucture investment - $252 Billion
2017 - India's Infrastructure investment - $300 Billion

Note: I am no where comparing it with china, but its not stagnating - its increasing.

 

[punit]

How can China sell a dream to Lankans when they actually initiated the Hambantota project and offered India first to build it. Indians knows Lankans well but still spreading China fear syndrome when in fact China is getting screwed by the Lankans...China build the port and air port, employs tens of thousands of Lankans and paid billions to Lankan contractors. Even though China owns the facilities through dubious default by the Lankan government(nobody pay taxes and corruption on every level of politics)...billions of loans have to be written off. What a sweet deal for the Lankans...Why does China do it...because it takes balls to invest long term and achieve strategic objectives...which something Indians are sorely lacking in...big kahunas to accept losses.

HAIL THE new saviours !!

 

[RealNapster]

Pakistan bought entire Balochistan for 3 million USD post independence

Wrong.
We bought Gawadar, Not Baluchistan. it's not even 0.5% of total land of Baluchistan.

 

[Kabira]

Pakistan signed in to be a debt ridden country for 3 decades. .its a known risk that both pakistanis and the Chinese investors have taken, that's how businesses operate.

It remains to be seen how it pans out for you guys. But going by the state of affairs and the corruption and law and order issues you guys have, the risk factor is much higher for Pakistan than it was for Sri Lanka.

Again I ask about facts and figures. Sri Lanka GDP $80 billion. 95% of it's revenues goes to debt serving. Out of $46 billion CPEC, only $11b is loan at interest rate 1-2% over 25 years.

Pakistan tax collection is $39b for 2017-18, likely to be over $80b minimum

by 2023. What Sri Lanka hd to go through will not happen to Pakistan even in worst case scenario.

 

[xyxmt]

Well I can foresee Chinese blaming the corruption of Pakistani Govt. for Pakistan getting into a massive debt trap after a few years just like they are blaming Sri Lanka now.

Pakistan is going in a debt trap for last 20 years just as Pakistan is about to be broken for as far as I can remember. a Country of 20 karore doesnt go broke, doesnt get broken so try to find some other amusements

 

[ckf]

Every nation knows about its national interests. In the time of globalization talking about regional equilibrium perhaps suits chinese national interests. Our only major concern about CPEC is that it passes through our territory under illegal occupation of Pakistan. Would China join an economic corridor from India to Vietnam that passes through Arunachal Pradesh?

Does India have the resources and capa to build through Arunachal?

Yeah, another example is Laos a country with $ 12.3 billion GDP. China is building $ 6 billion project, while they have no guarantee on how they pay back such a massive sum. The option Laos has is to give away their mineral resources.
New game of economic colonization.

You shouldn't invent words like economic colonization...that's an oxymoron...colonization is military domination, econonic dominance is just dependence. Go to Laos, you will see the effect of Chinese infrastructure spending on Laos society. People are able to freely move from Vietnam, China, Cambodia(almost complete) and Thailand, which wasn't possible before. Now goods, tourist, light manufacturing is flourishing in Laos. Laos is actually no longer dependent on China since trade with Indochina region has exploded. Laos gdp per capita is $1850 USD and had much higher economic growth than India in the last 10 years. Laos is leaving India in the dust. As for debt, Trump is always in debt, that didn't prevent him from becoming the President.

 

[Tom99]

Example of Sri Lanka is given when people say to Pakistan to be careful about China investment. Not just foreigners but also opposition parties in Pakistan.

What exactly happened? Apparently Sri Lanka debt was so high that now 95% of their tax revenues goes to debt serving?

This will obviously not happen to Pakistan because tax revenues will increase to $39b next year and $80-100b by 2023. CPEC loan is $11 which Pakistan will have to pay starting 2022 over period of 25 years.

But I was wondering why Sri Lanka got fucked? How can you function with just 5% of tax revenues? By taking more loans I guess.

Can you provide factural figures for Sri Lanka's total external debt and how much of that is to China? And how much debt repayment Sri Lanka is doing?

What I have found out Sri Lanka have about 45-60 B debts and from that only 8B is to China.

 

[ckf]

Wrong.
We bought Gawadar, Not Baluchistan. it's not even 0.5% of total land of Baluchistan.

Without Gwardar(if India had bought the port), Pakistan would of lost baluchistan to India.

 

[RealNapster]

Without Gwardar(if India had bought the port), Pakistan would of lost baluchistan to India.

And why would have they sold Gwadar to India ? They sold Gawadar to Pakistan Because it was far from then and attached to Pakistan. BTW do study what happened to GOA.

 

[illusion8]

Again I ask about facts and figures. Sri Lanka GDP $80 billion. 95% of it's revenues goes to debt serving. Out of $46 billion CPEC, only $11b is loan at interest rate 1-2% over 25 years.

Pakistan tax collection is $39b for 2017-18, likely to be over $80b minimum

by 2023. What Sri Lanka hd to go through will not happen to Pakistan even in worst case scenario.

Are you sure the interest rate is just 1-2%? I read somewhere that it was 6-7% with a 1st year insurance premium of 7%.

Also, the rest are infra investments that are to be paid by pakistani consumers, what's happened to sri lanka and tajikistan is what happened between pakistan and private power producers earlier who went to international courts against pakistan to recover their dues.

Chinese investments have seen good returns and sometimes bad returns, but the good thing is pakistan is providing them with very good returns as well as sovereign guarantees for those returns. Now, how true do those investments prove to be is the question that will be answered in a few years time.

 

[Kabira]

Are you sure the interest rate is just 1-2%? I read somewhere that it was 6-7% with a 1st year insurance premium of 7%.

Also, the rest are infra investments that are to be paid by pakistani consumers, what's happened to sri lanka and tajikistan is what happened between pakistan and private power producers earlier who went to international courts against pakistan to recover their dues.

Chinese investments have seen good returns and sometimes bad returns, but the good thing is pakistan is providing them with very good returns as well as sovereign guarantees for those returns. Now, how true do those investments prove to be is the question that will be answered in a few years time.

Yes 100% sure about 1-2 interest rate, you are likely confusing 7% with something else. They didn't went to international court. Line losses is problem in Pakistan because of theft, and in last 4 years circular debt have piled up to $3.5 billion. Around $800 million per year so it's not that big of a deal. To curb line losses government will not provide electricity to feeders where recovery is low. And also work on improving recovery rate.

 

[illusion8]

Yes 100% sure about 1-2 interest rate, you are likely confusing 7% with something else. They didn't went to international court. Line losses is problem in Pakistan because of theft, and in last 4 years circular debt have piled up to $3.5 billion. Around $800 million per year so it's not that big of a deal. To curb line losses government will not provide electricity to feeders where recovery is low. And also work on improving recovery rate.

I still have doubts about the 1-2%, when your agencies haven't mentioned at what rate are these loans being procured...anyway, that's a discussion for when the actual figures are revealed.

What you need to be worried is the handing over of these projects without a due process of competitive bidding and no transparency in what's being paid and what's to be paid by pakistani consumers. I doubt any open audits have been done to look at the feasibility of the projects. There isn't a bright history or precedent to prove that such projects become feasible over a period. Case in point is what happened in sri lanka or tajikistan.

 

[NoOne'sBoy]

Previous government spent on useless projects like building an airport in a forest out of nowhere instead of solving critical issues like public transportation and waste management. New government came in and subsidized, stole money from the central bank and fucked up even more. You pakistanis are going to have the same problem if you get in bed with China because there's accountability with Chinese finance unlike US.

 

[ckf]

Previous government spent on useless projects like building an airport in a forest out of nowhere instead of solving critical issues like public transportation and waste management. New government came in and subsidized, stole money from the central bank and fucked up even more. You pakistanis are going to have the same problem if you get in bed with China because there's accountability with Chinese finance unlike US.

Why does Sri Lankans fall into the trap that its always other people's fault? It's more like investor beware and stay away from the Sri Lanka...

 

[Sam.]

Why does Sri Lankans fall into the trap that its always other people's fault? It's more like investor beware and stay away from the Sri Lanka...

So you feel Sri Lanka is risky country to invest ?