According to local media reports, Muhammad Aurangzeb, the Pakistan Finance Minister on a visit to China recently met his Chinese counterpart and discussed ways of getting the country out of power sector debts.
Last week in Beijing, Arabgazebe along with Pakistan’s Energy Minister Sardar Awais Laghari met with Chinese finance minister Lan Fo’an to tackle this problem, The Express Tribune reported on Friday.
Officials at Pakistan’s ministry said that asked for a period of eight more years to repay energy debt; revised interest payments from US dollar based into Chinese currency and reduction in overall interest rates for CPEC as well as non-CPEC China funded projects.
Ending the previous fiscal year, outstanding dues for China-Pakistan Economic Corridor (CPEC) power projects have increased by 44 percent or Rs401 billion up to Rs1.3 trillion according to the authorities concerned.
These measures are aimed at reducing cost of energy and meeting IMF conditions so as to secure USD 7 billion bailout package.
By failing to honour its payment obligations under the CPEC Energy Framework Agreement signed between China and Pakistan in 2015, Islamabad has also affected financial relations between the two countries.
The two ministers also held a separate meeting with President of China Export and Credit Insurance Corp. (SINOSURE), which insured loans made by Chinese companies through their branches in Pakistan.
China had provided external financial assistance to Pakistan before through credit provision. Just over $20bn has so far been invested by China alone towards planned energy projects in Pakistan alone.
Earlier this month the IMF granted a USD 7 bn loan facility for heavily indebted Pakistan. It also raised issues pertaining high incidence rates of theft of electricity and transmission losses causing accumulation of debt all along production chain within Pakistan.
In a post on social media platform X last Thursday night, however, PML-N leader Awais Leghari wrote that during their meeting they had briefed Chinese Minister of Finance about efforts to introduce tax and energy reforms in the system of his country.
Mid-August is expected to see a meeting of IMF’s Executive Board that will discuss the USD 7 billion bailout package for Pakistan, The Express Tribune reported citing sources.
A version by The publication goes on to say that a staff level agreement between Islamabad and the fund was reached on July 12 adding that authorities must obtain external financing assurances before the board gathering.
Pakistan has received 23 IMF bailouts since it gained independence from India in 1947, according to a report by Voice of America. Over next three-four years, Pakistan needs to pay off about $8.4bn to the fund.
The Pakistani authorities and the IMF team have reached a staff-level agreement on a comprehensive program endorsed by the federal and provincial governments, that could be supported by a 37-month Extended Fund Arrangement (EFF) in the amount equivalent to SDR 5,320 million (or about USD 7 billion at current exchange rates), Nathan Porter said in an earlier statement.
Structural reforms needed for addressing high distribution losses were also stressed by IMF which should be adopted by Pakistan as well within its power sector thereby curbing any rates of power thefts.
