Pakistan-China Agree to Upgrade CPEC

During Prime Minister Shehbaz Sharif's recent visit to China - his first since his victory in general elections in February - Pakistan and China announced plans to upgrade the China-Pakistan Economic Corridor and set in motion Phase II of this ambitious initiative. Pakistan has long pitched CPEC as an initiative to revive its economy. During the meeting with Sharif, Xi emphasized the importance China places on its relationship with Pakistan. Persisting political instability in Pakistan has also led to uncertainty for international investors and stakeholders, including China. According to reports, Beijing recently requested Pakistan to launch a major military operation against militants targeting Chinese nationals in Pakistan, improve its currency reserves, and clear pending payments for its power producers operating in the country. China may wait to decide on Pakistan's budgetary requests until it completes its budget process and ongoing negotiations with the IMF. Likewise, the IMF could be interested to see how Pakistan plans to address its concerns regarding budgetary gaps, especially regarding the future of debts Islamabad owes China. As China and Pakistan move forward with the second phase of CPEC, addressing these concerns will be crucial to put ties back on track.