October 17, 2018 (MLN): “Higher levels of Saudi investment in Pakistan’s infrastructure will suit the geopolitical needs of both countries, underpinning our expectation that Saudi Arabia will continue to ramp up investment levels in Pakistan”, suggests Fitch Solutions – research arm of Fitch Rating agency.
The agency however remains skeptic on the recently signed memorandum of understating between the two countries but highlights the growing scope and mutual willingness towards partnerships in the infrastructure investment.
Saudi Arabia has agreed to set up 110,000 barrels per day refinery at Gwadar and liquefied natural gas based power projects in country’s most populous province, Punjab.
The report says that securing funds from Saudi Arabia will also decrease Pakistan’s reliance on China, who is currently financing around 22 per cent of the country’s total projects. Pakistan’s dependence on Chinese funding can be estimated by the relatively low – at 5pc – share yet second most share of project financing from US funds.
The report also adds that Pakistan has grown wary of overreliance on China amid news reports of “debt-trap diplomacy” and the ownership transfer of Sri Lankan port to Chinese authorities has put economies under Belt and Road Initiative in to spotlight.
It adds that, “Pakistan’s fiscal situation remains precarious. The country’s debt profile has risen considerably in recent years, representing an estimated 72.7pc of GDP in 2018, and debt servicing costs are weighing on the budget balance, which was in a deficit of 6.6pc of GDP for the financial year 2017-18.”
China, the report claims, is becoming uneasy and has decided to diversify funding to countries like Pakistan and their inability to repay massive loans.
Fitch further estimates Pakistani government to “look to other international partners employing more flexible financing structures as a means of delivering infrastructure projects, facilitating a gradual diversification in the country’s competitive landscape in the years ahead.”
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