Pakistan ministers in china plead for debt relief

Pakistan ministers in china plead for debt relief

Pakistan Finance Minister Muhammad Aurangzeb who is on a China visit met with his Chinese counterpart and held talks seeking relief for the country from power sector debts, local media reported.

Aurangazeb along with Pakistan's Energy Minister Sardar Awais Laghari met with Chinese finance minister Lan Fo'an on Thursday in Beijing to discuss the issue, The Express Tribune said on Friday.

The Pakistan ministers requested an eight-year extension for repaying energy debt, converting US dollar-based interest payments to Chinese currency, and reducing overall interest rates for both CPEC and non-CPEC Chinese-funded projects, ministry officials said according to the Islamabad-based newspaper.

They formally requested China to reschedule its debts, with outstanding dues for China-Pakistan Economic Corridor (CPEC) power projects increasing by 44 per cent to Pakistan Rs401 billion by the end of the last fiscal year.

These measures aim to lower energy costs and secure International Monetary Fund (IMF) approval for a USD 7 billion bailout package.

Unpaid debts by Pakistan violate the CPEC Energy Framework Agreement signed in the year 2015 between China and Pakistan and hinder further financial and commercial relations between the two countries.

The two Pakistan ministers -Aurangazeb and Laghari also met with the President of China Export and Credit Insurance Corp (SINOSURE), which is the body that insured loans Chinese companies took from Chinese banks to set up projects in Pakistan.

Loans from China have helped Pakistan in the past to meet its external financing needs. China has invested over USD 20 billion in planned energy projects in Pakistan.

The IMF this month agreed on a USD 7 billion bailout for Pakistan which is under heavy debt. The world body also raised concerns over high rates of power theft in Pakistan and distribution losses that result in debt accumulating across the production chain.

Pakistan energy minster on Thursday in a post on social media platform X said that in their meeting they had briefed Chinese Minister of Finance on his country's ‘efforts to introduce tax and energy reforms in the system’.

Meanwhile, the Express Tribune citing sources said that the International Monetary Fund (IMF) Executive Board is expected to convene in mid-August to discuss the USD 7 billion bailout package for Pakistan.

A staff-level agreement between Pakistan and the IMF was reached on July 12 the publication said adding that Islamabad must secure external financing assurances before the board meeting.

According to a report by the Voice of America (VoA), since gaining independence in 1947, Pakistan has received 23 bailout packages from the IMF. Pakistan owes about USD 8.4 billion to the IMF, to be repaid over the next three to four years.

In a previous statement IMF's Mission Chief to Pakistan Nathan Porter stated, ‘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).’

The IMF emphasised the need for structural reforms that Pakistan needs to take in its power sector to address high rates of power theft and distribution losses.