Overview
- Pakistan and China unveiled a Phase 2.0 agenda in early June that focuses on green energy, Special Economic Zones, technology cooperation and industrialisation instead of primarily funding roads and ports.
- China is now Pakistan’s largest bilateral creditor with about $29 billion in loans, contributing to a widening trade gap that left Pakistan dependent on Chinese debt rollovers and weak bargaining power with other lenders.
- Take‑or‑pay power contracts from CPEC projects have helped drive Pakistan’s power‑sector circular debt to about 1.89 trillion rupees, with roughly 543 billion rupees tied to CPEC plants and the IMF warning the obligations threaten economic stability.
- Security in provinces such as Balochistan has deteriorated as local communities complain of exclusion and insurgent groups have attacked Chinese workers, raising protection costs and endangering project delivery.
- Major projects and financing are being reworked—China stepped back from sole funding of the ML‑1 rail upgrade and multilateral lenders have joined consortia—so analysts say audited contracts, debt restructuring and local economic inclusion are needed before Phase 2.0 can succeed.