THE unusually wide gap in import payments recorded by two different government departments needs an explanation — especially since it appears to be related to CPEC machinery imports. The State Bank has highlighted the discrepancy in its latest quarterly report, saying that the gap between imports recorded at the port, and import payments made from the banks has widened to $3bn for the first half of the fiscal year, where the 10-year average for this gap is more like $1.6bn. Since a large part of the gap owes itself to the import of machinery for power generation, “it is highly probable that the widening gap between the two import datasets is linked with the CPEC accord” says the report. On the surface, this may appear a somewhat technical issue to most people, but it has deeper meanings, some of which could border on the sinister.

For one, the gap and the subsequent reconciliation exercises launched to bring clarity to it are evidence that the State Bank does not have a clear picture of the inflows and outflows associated with CPEC’s growing presence in the country. This could be one reason why we are unable to generate a clear picture on what liabilities and future outflow burdens are being taken on under the CPEC umbrella. The lack of transparency is evident because even the central bank, the custodian of the country’s foreign exchange reserves, cannot make the projections so vital to building a medium-term view on the viability of the external sector. But more troubling are the deeper ramifications. How much of this gap is covering misdeclarations in CPEC imports through over-invoicing? The matter is of urgent public interest because ultimately these imports will be paid back from money collected through the power tariffs to be paid by the consuming public.

Once the data is reconciled, there is going to be a large jump in the current account deficit of the country, which has already ballooned to troubling levels. We are assured that the net effect on the balance of payments will be zero, since this will be covered by a corresponding increase in financial account inflows, but those are debt-creating and we will still need a clearer picture on how their repayment obligations will be met. Meanwhile, a significant amount of damage has already been done to the integrity of our data, and by extension, to the financial credibility of the projects whose import requirements are responsible for this discrepancy. The finance ministry and Planning Commission must do more to ensure that all inflows and outflows under the project are in compliance with the country’s data reporting requirements because they are the primary stakeholders in the economic picture that CPEC is working to build. If Chinese enterprises have been given a free hand to bypass Pakistani reporting requirements, then this allowance must be withdrawn.

Published in Dawn, April 11th, 2017