The simmering tensions between the United States and China, which are quickly moving towards a cold war could be advantageous for Pakistan, as the country could become the next manufacturing hub.
“As the geopolitical confrontation between the US and China is likely to persist over many years, both Chinese and global manufacturers may move their factories from China to Pakistan,” said Canadian research firm BCA in its latest report titled ‘BCA Overweight View on Pakistan Equities’.
The development could be a major breakthrough for the country, which for years is trying to attract investors owing to its strategic location and ample manpower.
The report revealed that Pakistan is expected to receive considerable financial inflows this year, amounting to over $12 billion from multilateral and bilateral sources. “This will be more than enough to finance its current account deficit, which was at $11 billion over the past 12 months,” the report said.
The report pointed out the financing assistance Pakistan has managed to obtain from the International Monetary Fund (IMF), the World Bank, and the Asian Development Bank worth over $3.9bn so far.
Apart from disbursements in April G20 countries also awarded Pakistan a suspension of debt service payments, valued at US$ 1.8 billion, which will be used to pay for Pakistan’s welfare programs. Furthermore, the authorities plan to raise US$1.5 billion through the issuance of Euro- bonds over the next 12 months, said the report.
However apart from funds borrowed, the report said that the net foreign direct inflows, mainly driven by phase II of the China-Pakistan Economic Corridor (CPEC), are set to continue to increase over the remainder of this year, having already grown 40 percent year-on-year during the first six months of this year. About 63pc of that increase came from China.
“Meanwhile, as we expect macro-dynamics to improve in the next six months, net portfolio investment is also likely to increase after having been record low this year,” the report added.