State Bank on CPEC

Editorial Published December 10, 2015

SOME important remarks made by the State Bank governor, Ashraf Mahmood Wathra, about transparency in the China-Pakistan Economic Corridor projects deserve careful consideration.

In an interview given to Reuters, Mr Wathra said that “CPEC needs to be made more transparent”, going on to indicate that many crucial details of the various projects to be executed under the CPEC umbrella remain hidden even from him.

For example, he said that out of $46bn, he does not know “how much is debt, how much is equity and how much is in kind”. Details of this sort are important to know because they can help us understand the potential economic impact that CPEC will have in the future, given the many hopes attached to this project.

The State Bank has also repeatedly invoked the CPEC projects as the best hope for reviving growth in the country, but whether this is merely wishful thinking or a realistic expectation can only be determined if crucial financial details of the projects are known.

In a later clarification, the State Bank asserted that it remains positive about CPEC, but it stood by its transparency concerns.

Also read: Pakistan should be more transparent on $46bn China deal, SBP head says

The governor’s remarks are notable for a number of reasons. This is the first time that the need for greater transparency in CPEC has been mentioned from such an important platform as the State Bank.

Since the economy is faced with dwindling inflows of foreign investment and exports, it is crucial to know how its foreign exchange-earning capacity is going to shape up in the years to come, especially in light of the rising external debt burden that the government has been taking on.

Even though the government tells us that its plans to build industrial estates along the route of the road link from Gwadar to Khunjerab will help boost exports, Mr Wathra is entirely correct when he acknowledges this vision but adds that “we need to see this plan with more clarity”.

The CPEC project may indeed have tremendous potential for the country but only if it is implemented properly. By steadfastly refusing to share any of the crucial details of the various projects that make up the CPEC bouquet — even with stakeholders as important and central to its execution and impact as the State Bank — the government is not shoring up confidence in its capacity to oversee the implementation of such a large vision.

Published in Dawn, December 10th, 2015

Newspaper

Pakistan should be more transparent on $46bn China deal, SBP head says

CPEC transparency

China-Pakistan corridor: Visibility of the game changer

Gramscian

Dec 10, 2015 02:46am

'For example, he said that out of $46bn, he does not know “how much is debt, how much is equity and how much is in kind”. Well, if the head of SB does not know, it does not inspire much confidence in the way the government is conducting its economic affairs. Why does not the government answer this simple question and settle it for once and all?

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DKM

Dec 10, 2015 03:46am

There is so much covered information which creates doubts. Why are leaders hiding facts ? Today the news of India giving contract to Japan for bullet train......everything .....the cost, terms of payment, time frame, rate of interest, or whatever you wish to know........is in black and white for everyone to see.........This is called transparency.....

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M M AMIN

Dec 10, 2015 06:35am

Given the limits of his powers as governor , State Bank , it's bold of him to say and express his concern . Congrats to the Editorial board and the Gov. Would the Fed. authorities plz clarify ?

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K Alam

Dec 10, 2015 09:27am

Fully endorse the views of Governor SBP, people from every region of the country has similar feelings as they do not know what kind of projects will be started in their region and how?

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M Sohail

Dec 10, 2015 09:46am

friends dont worry Mr. Dar is not going to reveal ant thing about the project as he is much more interested in corruption and sending that money to dubai

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fitting Reply

Dec 10, 2015 09:47am

CPEC, you will realize later on, was nothing but a vehicle for massive corruption.

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Pakistani

Dec 10, 2015 10:00am

Poor Pakistani awam shall be paying back through their bleeding nose for decades these loans or grants or whatever finally landing up in the bank accounts of the rulers. What a future of ours?

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12KA4

Dec 10, 2015 10:21am

Haaa. So much for a project being labeled as game changer!!

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Khalil Anwer Hassan

Dec 10, 2015 10:55am

Assuming that the report is true, it is perhaps for the first time that our Central Bank Governor has made an honest statement about the level of importance that the Government is actually prepared to assign to SBP, while undertaking major international financial commitments. Mr. Wathera's helplessness also indicates that no proper feasibility study and financing plan has been documented for conversion of a vision into a perfectly viable and doable project of the size of USD 50 m. Given this kind of ad hoc planning at the Federal level for one of the most important projects ever undertaken in our history, one wonders how unprofessionally the rest of our economy is being managed.May God help this country.

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khanm

Dec 10, 2015 11:22am

Transparency ???? A basic tenet of a healthy democracy is open dialogue and transparency but in Pakistan We live in a culture of destructive transparency.

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Riyadh

Dec 10, 2015 11:31am

Guys get ready for a change of SBP Governor very soon

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Shabbir Kazmi

Dec 10, 2015 11:32am

Though, I hate to say this but also could not resist from saying. Over the years it has been noticed that the successive governors of central bank love to talk about things which do not fall in their domain. How the CPEC projects will be executed should not be a cause of concern for the governor. These topics must be dealt with by Planning Commission and concerned ministries i.e. water and power, finance and down the lane by public works departments at deferral and provincial levels.

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rabia

Dec 10, 2015 11:34am

CPEC would change the destiny of the common man and put the country on the road to progress and prosperity. Gawadar is the world’s deepest sea and If CPEC is complete then its a potential game changer…It needs to be complete on time and keep corruption away

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SWEET DEAL

Dec 10, 2015 11:38am

Chinese rulers, as usual, are totalitarians and don't answer public questions. In Pakistan Nawaz & co maintains SECRECY over the CPEC. Don't know whats happening and how much amount of $ 46 billions goes into these people' pockets.

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Murtaza

Dec 10, 2015 11:50am

@Shabbir Kazmi It is of concern to the SBP because it affects foreign exchange inflows. It's explained above in this paragraph: "Since the economy is faced with dwindling inflows of foreign investment and exports, it is crucial to know how its foreign exchange-earning capacity is going to shape up in the years to come, especially in light of the rising external debt burden that the government has been taking on. " There's also the small matter of the fiscal deficit. The GoP's component of these schemes is financed through deficit spending and eventually the burden of that falls on the central bank. It has to print new money and lend it to commercial banks who in turn lend it to the government. It can't lend directly to the govt. because of IMF restrictions.

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Dec 10, 2015 12:01pm

whats makes the government keep parts of the project secret if its supposed to change the fate of this country for good. I just wonder.

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Uzair

Dec 10, 2015 12:03pm

If all the information is hidden for good then it must be welcomed , but if it came out deceptive as fanfare and hopes have been related to CEPEC to change future of Pakistan , then govt would have to pay hefty toll for it . As governor's gesture of sleeping at the wheel seems bit discouraging , hope all go well

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Malik Achakzai

Dec 10, 2015 12:11pm

Pakistan where the leading officials of such institutions and organizations like State Bank are always playing for political gains and status so get in politics this way. I doubt he wouldn't be knowing the CPEC project; then who are the people they know about it.

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wellwisher

Dec 10, 2015 12:57pm

China had similar projects in Burma, but soon they were found to heavily China and finally were called off

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Kashif Syed

Dec 10, 2015 01:11pm

Nawaz Sharif and his cronies will make billions off of CPEC. Pakistan will remain poor.

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Ishrat salim

Dec 10, 2015 01:37pm

@Shabbir Kazmi Sir, grow up. Where finances are involved SBP has to be in the loop, as in the end it is SBP who has to foot the bill. has to make room for any commitments & pay backs as per govt commitment against debt, equity or in kind with details. This is what is missing & SBP governor is right in its demand for transparency, while agreeing & wishing the best for the project. However, please also note, CPEC is not going to end in 2018 but add 30 years, hence SBP has to make its policies accordingly to meet commitments even though it is too early to know if this govt of PML N will be there for next 30 years. So, who so ever comes will be confronted to meet with this massive financial commitments & it will be SBP who ahs to meet these financial commitments to pay back as per agreement. Hence, your understanding to these complex G to G agreement is necessary before you give sweeping statement. Each & every dept has a role to play at different level & SBP is not living in isolation.

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Azmeen

Dec 10, 2015 01:41pm

Govt., must share details of CPEC with the key stakeholders.

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Lost cause

Dec 10, 2015 03:19pm

This is real concern for SBP. A central banks which is maintaining foreign exchange reserve of 20 billion dollars has to factor the investment of 46 billion dollars and repayment of loan component in future and it's effect on local money market.

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Abbas Baloch

Dec 10, 2015 04:34pm

CPEC, another White elephant in the zoo of good governance from Animal Farm an allegorical fictional book of George Orwell or perhaps from Horse and cattle show of Lahore. Hoping PML-N which has become a final beacon of hope into the gloom of uncertainty will break the jinx and concrete it in suggested cost and on established route

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Umer

Dec 10, 2015 06:08pm

There is no doubt that current government has corrupt people. CPEC is very important for Pakistan's economic prosperity and government has to get rid of corrupt people in order to make it transparent.

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Aisha

Dec 10, 2015 09:12pm

how the wierd is that , even the governor of the SBP don't know the composition of investment ??

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Naveed

Dec 10, 2015 09:44pm

The political elite only see what they personally gain from projects of National interests, yes there is a transparency problem but it isn't some thing that cannot be worked out where interest of both parties can be met and common man also benefits from downstream bounty.

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Unshackle Pakistan

Dec 11, 2015 12:40am

@Murtaza Central bank printing money to lend to commercial bank itself is destructive. Federal government needs to find revenues to pay off debt, not monetize the debt, causing inflation and destruction of the poor. The whole point of IMF restriction is so that government doesn't borrow just to waste it. If it's wasting it SBP is helping it hide debt and create a bigger problem.

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SHAIKH YOUSUF

Dec 11, 2015 07:20am

Most of our leaders in the past only robing our country without producing. I believe that Nawaz Shrif will also make money out of this but at least he is producing some for the country too. In USA they bring the war on poor countries to make money for their friends who involve in war industries.

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