current affairs MCQ #6985

Pakistan receives a large inflow of Chinese investment under CPEC. A Pakistani economist arguing this creates a "debt trap" would MOST likely base this concern on which reasoning?

current affairs MCQ #6985

  1. Question 1

    Q1. Pakistan receives a large inflow of Chinese investment under CPEC. A Pakistani economist arguing this creates a "debt trap" would MOST likely base this concern on which reasoning?

    • A) Chinese loans are denominated in Pakistani rupees, preventing any profitable return for Chinese investors
    • B) CPEC investment is classified as foreign direct investment, which is constitutionally not repayable
    • C) If Pakistani infrastructure projects fail to generate sufficient revenue, Pakistan may struggle to service Chinese loans, creating leverage for China
    • D) The State Bank is legally prohibited from using CPEC-related assets as collateral for any future borrowing

    Answer: If Pakistani infrastructure projects fail to generate sufficient revenue, Pakistan may struggle to service Chinese loans, creating leverage for China

    Explanation: The debt trap concern arises from the structural risk that if CPEC infrastructure projects (ports, power plants, highways) fail to generate revenue sufficient to service the associated Chinese loans, Pakistan could be compelled to make strategic concessions to China as a creditor, a pattern critics have labeled "debt trap diplomacy."