Chinese-led infrastructure boom mostly bypasses Pak banks

Bloomberg

China’s ambitious $55 billion
infrastructure project that’s
underway throughout Pakistan is in danger of becoming a
non-event for the South Asian nation’s banks.
President Xi Jinping’s multi-billion dollar economic corridor, part of his ‘Belt and Road’ initiative, has been viewed as a game-changer for Pakistan. Yet while local banks are keenly waiting to get their share of the pie, holding more than $20 billion for potential financing, much of its has already been filled by the Chinese with Pakistani lenders getting little look in.
So far local funding only amounts to about $474 million, according to Saad Hashemy, research director at Karachi brokerage Topline Securities. “As of now around $6 billion to $7 billion worth of projects are likely going on,” Hashemy said. “Out of that 10 percent, or around 50 billion rupees, can be local financing.”
The lack of Pakistani input into the China-Pakistan Economic Corridor, which the government says will drive economic growth to a targeted 6 percent this fiscal year, adds to concerns that its benefits may not be as widely distributed as initially thought.
It runs the risk that Pakistan will be left paying interest on loans to Chinese banks way into the future.
“It seems the lion’s share of CPEC financing will come from China itself,” said Bilal Khan, a senior economist at Standard Chartered Plc. At $3.5 billion,
the Thar coal mine is one of the most expensive energy projects China is financing in Pakistan and is expected to generate 1.3 gigawatts of electricity in coal-
fired power stations. China has also agreed to lend $5.5 billion
for a significant upgrade of the nation’s rail system.
Bankers including Standard Chartered’s Chief Executive Officer Bill Winters, who visited Pakistan in March, are eager to finance Chinese projects. Meanwhile, local lenders, both Islamic and conventional, are keen to deploy funds after parking much of their advances in government securities, holding 82 percent of the total 9.26 trillion rupees of local securities.
Shaukat Tarin, a former finance minister and an adviser to Silkbank Ltd., said conventional Pakistan lenders could lend as much as 1.7 trillion rupees to the projects. Islamic banks are also holding surplus liquidity of about 500 billion rupees, according to Ahmed Ali Siddiqui, head of product development at Meezan Bank Ltd., the nation’s largest Sharia-compliant bank.