Two extremely disturbing factors need to be highlighted. First, clearly the borrowing rate was not concessional. China does not normally extend concessional loans for balance of payment support and/or budget support though it has in recent years extended massive loans to support infrastructure projects under CPEC/OBOR. In case it has in our case, the interest rate should be divulged. It is inexplicable why the PML-N administration opted to procure such a massive amount at non-concessional rates at a time when Pakistan was already on an International Monetary Fund Programme (Extended Fund Facility 2013-16) that allowed access to other sources of concessional funding (which were also availed and account for the massive rise in external borrowing by the PML-N administration - from around 60 billion dollars in 2012-13 to over 90 billion dollars today, with China accounting for more than 43 percent).
The justification of the Dar-led Finance Ministry may be that the borrowing was necessary to cut down on the unsustainable budget deficit that it inherited (8.2 percent of GDP) however, to do so at the cost of borrowing such a massive amount at such a high interest rate with a very small amortization period smacks of financial hara-kiri which explains the current state of the economy. Besides the deficit today is comparable to what the PML-N administration inherited in 2013 though the exact amount maybe understated by the Pakistan Bureau of Statistics, whose data manipulation during the past five years reached a historical high. In addition, the then Finance Minister Ishaq Dar and his henchmen at the Finance Ministry frittered away the considerable fiscal space created due to the massive decline in the international price of oil while keeping the rupee overvalued and delaying refunds to show better revenue collections that simply compounded the problem and which explains why the current account deficit is 18 billion dollars and the foreign exchange reserves not enough to pay for two months of imports.
And secondly, it is necessary for the PML-N to clarify what this massive amount of money was used for; economists would no doubt argue that even if the amount was used for infrastructure development, that typically required a long-term gestation period, the justification to spend such a large amount on projects that are unlikely to be completed before the loan repayment is due, is an appallingly poor investment decision.
To conclude, China is neither a fair weather friend, Pakistan's relations with China are not regarded as transactional, nor a country that has failed to support Pakistan at major international forums especially in the post-9/11 world where terror activities have undermined Pakistan's relations with other countries, particularly the United States. However, borrowing at these terms to fund current expenditure is an economically flawed decision and one can only hope that those responsible are held accountable. In addition, the Fiscal Responsibility and Debt Limitation Act 2005 limits debt to GDP at 60 percent; however the government requires a simple majority to pass a finance bill, perhaps the new parliament may consider more than a simple majority to bypass the debt to GDP limit.