Disadvantage of cpec for Pakistan
Answers
Answer:
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Explanation:
It has great economic potential for Pakistan, but a lot of people and political parties are weary of the possible downsides.
The first downside is debt. Pakistan has a falling foreign reserve, about 11 billion USD as of now, which is only 3 months of imports. CPEC is now worth 56 billion dollars, almost 19% of Pakistan’s GDP. Problem is, CPEC, although given on low interest rates, is something Pakistan cannot take. Debt levels will reach astronomical levels if it is not mitigated, and given he political uncertainty in Islamabad, it is unlikely an fiscal actions will be taken any time soon.
The second downside is related to the first. China is seeking to either get returns on their investments or wants control of their projects. If you look to Sri Lanka, they too were in a massive debt situation after China undertook massive infrastructure projects. So the Hambantota Port was leased to China for 99-years. With a worsening economic situation in Pakistan, Pakistan may enter a debt trap and be forced to hand over Gwadar or some such project to China in a lease.
So in conclusion, CPEC has a lot of potential to be beneficial but perhaps Pakistan needs to be more cautious.