Abdul Qadir Memon, Consul General of the Consulate General of Pakistan, Hong Kong & Macau, clarified on Thursday that attributing the country’s current acute shortage of foreign reserves to the repayment of Chinese loans is a “misunderstanding”.

“To blame China for the shortage is totally incorrect,” said Consul General Memon. “It is oil, rather than Chinese loans, that are the cause of the shortage.”

He told Maxsource Media that the false reporting on this issue has created a fear in Pakistan that might undermine the China-Pakistan Economic Corridor (CPEC), a flag-ship project of China’s “Belt and Road Initiative” (BRI). Officials in Islamabad have already made statements regarding the true reasons for the shortage, but the media has failed to show any interest in these statements so far.

Some 70% of crude oil consumption in Pakistan comes from imports. Two weeks earlier, the United States Secretary of State, Mike Pompeo, wrote a letter saying that the first phase of US sanctions will take effect on 6 August. This immediately created fear and tension, both in the oil markets and the international community. The price has since increased by 5% during the second half of July. Overall, the average monthly price of Brent crude oil has recorded a sharp increase of 44% since last August.

Brent Crude Oil Price, source: Market Insider

On the other hand, Pakistan recorded a sharp increase of 60.35% in the price of crude oil imports for the 2017-2018 fiscal year. This due to both the price increase and the rising demand of petroleum products domestically. However, because of the price rise and the depreciation of the Pakistan Rupee, crude oil imports for that year grew only by 28.72%.

Since the amount of oil imported represents approximately one-third of the total imports for that period, the trade deficit surged by 43% to $ 15.961 billion as compared to the previous year. This decreases the current supply of foreign reserves for the country, according to Pakistan Today.

As the imports of crude oil become increasingly burdensome, the domestic demand for petroleum products continues to increase. But thanks to the increase in the supply of electrical power, productivity in Pakistan has improved.

Consul General Memon stressed the importance of electrical power generation in Pakistan three times during his interview with Maxsource Media. He also said that CPEC power plant construction projects have greatly increased the electrical power generation capacity of the country. Historically, Pakistan has suffered severe shortfalls in electrical power generation, a chronic energy problem in such a populous country. Last August, the electrical power generation shortfall was reported to be 7,000 megawatts; but the number plummeted to 3,000 megawatts 12 months later, according to the Pakistan Country Commercial Guide.

Abdul Qadir Memon, Consul General of the Consulate General of Pakistan, Hong Kong & Macau, Photo by Adrian Ng

Research conducted by the London-based Association of Chartered Certified Accountants (ACCA) reports that their energy shortages should be eased by the 21 energy projects currently under construction by the CPEC. These projects will eventually produce 16,400 megawatts of power, roughly equivalent to Pakistan’s capacity in 2016. By the end of June, the so-called “Early Harvest Projects” of CPEC will already be in operation. These projects are expected to generate over 11,000 megawatts, assuming they all reach their full capacity. The current challenge lies in upgrading the existing power transmission and distribution systems.

The increase in electricity supply, combined with other CPEC infrastructure construction projects, have already boosted productivity in Pakistan. Last year, the country recorded a GDP growth of 5.3%, and Counsul General Memon said, with confidence, that GDP growth will likely reach 6% this year.

When the United States Secretary of State, Mike Pompeo, warned the IMF on Monday to not grant a bailout to Pakistan because it would “compensate Chinese investors,” Pakistan officials reportedly said they would “search for other options” for the sake of their future. As public confidence in the social and economic development of the country grows, Pakistanis do not want an emergency bail out to pay off debt, but rather additional time for improvements in domestic productivity to generate positive results; such as a lower employment rate, the elimination of poverty, and greater social safety and prosperity.

Over the past two years, BRI has created 38,000 jobs. The Applied Economics Research Center (AERC) has estimated that CPEC could create over 700,000 direct jobs between 2015 and 2030. This is the fundamental reason for China’s ambitious BRI projects being welcomed and unanimously supported by every political party in Pakistan. For ordinary people, a job means income and hope; for a country trying to eliminating poverty, economic growth strengthened by local revenues means stability and success. For example, the Karot hydropower plant, has created 2000 jobs for the local economy and generated an annual revenue of $1.42 million for the local government.

Consul General Memon publicized that a recent survey in Pakistan has shown that 80% of the population has a favourable attitude towards China. “It is 80% of ordinary citizens, not government officials or scholars!” Memon stressed.

The Construction of Peshawar – Torkham Expressway. The 392-kilometer expressway is one of the biggest transportation projects by CPEC. (Photo by Xinhua News Agency)