Islamabad: Pakistan Has assured International Monetary Fund According to a media report on Saturday, it will seek concessions from Chinese investors participating in the China-Pakistan Economic Corridor (CPEC) power plants in the form of reduction in return on investment rates or rescheduling of loan repayments.
Government sources told The Express Tribune newspaper that concessions from Chinese investors were assured by Pakistani authorities to remove a bottleneck in finalizing an employee-level agreement with the International Monetary Fund.
Pakistan and the IMF this week inked a preliminary staff-level agreement on the Joint Seventh and Eighth Review for a $6 billion line of credit for cash-strapped Pakistan.
The agreement paves the way for the release of the much-awaited loan tranche of USD 1.17 billion that was put on hold since the beginning of this year.
The issue of reopening purchase agreements for power generation plants set up under the multi-billion dollar CPEC is unlikely to end in the near future, the report said.
The previous government led by Imran KHAN had made a similar commitment with another global lender – the world Bank – for a loan of USD 400 million in June last year.
He said Pakistan had informed the global lender that it would try to renegotiate the CPEC deals. However, this is less likely to happen because of the political sensitivity involved in the process.
The CPEC is a USD 60 billion flagship project of the Chinese government’s Belt and Road Initiative – a reason the Chinese leadership has already ruled out the possibility of reopening these deals.
The CPEC connects China’s Xinjiang province with the Gwadar port in Balochistan, giving China direct access to the Arabian Sea.
Sources said the government had assured the IMF that it would also try to explore the possibility of extending loan repayment against loans received by Chinese investors from financial institutions in their country for setting up these plants.
One hitch in the initial conclusion of the staff-level agreement was that IMF officials were asking for explicit commitments to reduce power generation costs and circular debt that had increased by Rs 850 billion during the last fiscal year.
The newspaper report said neither the finance ministry nor the IMF responded to requests for comment.
The IMF has in the past linked outstanding energy payments to Chinese power plants with concessions that non-CPEC projects had given to the previous government. Pakistan owes around Rs 300 billion to Chinese independent power producers (IPPs) and the IMF was tracking every payment made to them.
So far, 11 Chinese IPPs installed with an investment of USD 10.2 billion are operational, with a total generation capacity of 5,320 MW. Last month, the IMF denied that it had asked Pakistan to renegotiate CPEC IPP contracts, but said it supported the government’s multi-pronged strategy to restore the viability of the energy sector.
It said the move shared the burden of restoring viability among all stakeholders – government, producers and consumers.
Pakistani officials fear west CPEC will not change its policy to maintain pressure on the issue and advance its agenda through diplomatic channels and international financial institutions. Pakistan entered the IMF program in 2019, but so far only half the funds have been distributed as Islamabad struggles to keep the target on track.
The final disbursements were in February and the next tranche was to follow a review in March, but the government of ousted Prime Minister Khan introduced a costly fuel price cap, derailing fiscal targets and the programme.
Government sources told The Express Tribune newspaper that concessions from Chinese investors were assured by Pakistani authorities to remove a bottleneck in finalizing an employee-level agreement with the International Monetary Fund.
Pakistan and the IMF this week inked a preliminary staff-level agreement on the Joint Seventh and Eighth Review for a $6 billion line of credit for cash-strapped Pakistan.
The agreement paves the way for the release of the much-awaited loan tranche of USD 1.17 billion that was put on hold since the beginning of this year.
The issue of reopening purchase agreements for power generation plants set up under the multi-billion dollar CPEC is unlikely to end in the near future, the report said.
The previous government led by Imran KHAN had made a similar commitment with another global lender – the world Bank – for a loan of USD 400 million in June last year.
He said Pakistan had informed the global lender that it would try to renegotiate the CPEC deals. However, this is less likely to happen because of the political sensitivity involved in the process.
The CPEC is a USD 60 billion flagship project of the Chinese government’s Belt and Road Initiative – a reason the Chinese leadership has already ruled out the possibility of reopening these deals.
The CPEC connects China’s Xinjiang province with the Gwadar port in Balochistan, giving China direct access to the Arabian Sea.
Sources said the government had assured the IMF that it would also try to explore the possibility of extending loan repayment against loans received by Chinese investors from financial institutions in their country for setting up these plants.
One hitch in the initial conclusion of the staff-level agreement was that IMF officials were asking for explicit commitments to reduce power generation costs and circular debt that had increased by Rs 850 billion during the last fiscal year.
The newspaper report said neither the finance ministry nor the IMF responded to requests for comment.
The IMF has in the past linked outstanding energy payments to Chinese power plants with concessions that non-CPEC projects had given to the previous government. Pakistan owes around Rs 300 billion to Chinese independent power producers (IPPs) and the IMF was tracking every payment made to them.
So far, 11 Chinese IPPs installed with an investment of USD 10.2 billion are operational, with a total generation capacity of 5,320 MW. Last month, the IMF denied that it had asked Pakistan to renegotiate CPEC IPP contracts, but said it supported the government’s multi-pronged strategy to restore the viability of the energy sector.
It said the move shared the burden of restoring viability among all stakeholders – government, producers and consumers.
Pakistani officials fear west CPEC will not change its policy to maintain pressure on the issue and advance its agenda through diplomatic channels and international financial institutions. Pakistan entered the IMF program in 2019, but so far only half the funds have been distributed as Islamabad struggles to keep the target on track.
The final disbursements were in February and the next tranche was to follow a review in March, but the government of ousted Prime Minister Khan introduced a costly fuel price cap, derailing fiscal targets and the programme.