THE cancellation of Chinese President Xi Jinping’s visit to Pakistan has added to the anxiety being felt by investors — foreign and domestic — in Pakistan.

The cancellation, as well as the manner in which it has been announced, is a reminder of the steep cost Pakistan is paying for the current power struggle in the country.

It is symptomatic of the chaotic response that the government is giving to the challenge posed by the continuing protests that the announcement came on the personal Twitter feed of a senior government minister while official circles were busy denying the news. Then the Chinese foreign office refused direct comment on the matter, only saying that since the visit had not been officially announced, the question of any cancellation did not arise.

More than 36 hours later, Pakistan’s Foreign Office finally issued a formal announcement of the visit being put off. In the intervening period, speculation and rumour filled the air, and many of the privately posed reasons behind the cancellation will continue circulating long after the dust has settled.

More damaging has been the question of the fate of the $34bn worth of projects the president was said to be bringing with him. The government is saying these ‘investments’ have suffered a setback, whereas PTI chief Imran Khan has been loudly responding that these projects were never ‘investments’ to start with, they were loans, and compared their terms — 7pc — with those offered by multilaterals like the World Bank and the ADB.

Both parties are being disingenuous at best. The funds in question are not investments, they are more like project financing that require the machinery in question to be procured from Chinese entities. And comparing their terms to those offered by the multilaterals makes no sense since the latter do not want to touch coal-fired power plants due to environmental concerns.

Pakistan’s next best alternative is private financing, which if the returns on the last Eurobonds are anything to go by, are close to 7pc. The uncertainty is further aggravated by Moody’s announcement that Pakistan’s Fund programme might be disrupted by the protests.

The stalled talks on the fourth review with the Fund are a further reminder that large stakeholders from outside are waiting for the protests to be resolved. The government needs to do a better job of communicating the facts to prevent rumours and speculation from taking over.

Published in Dawn, September 7th, 2014