Pakistan has guaranteed the International Monetary Fund (IMF) that it will make every effort to obtain concessions from China-Pakistan Economic Corridor (CPEC) power plants in the form of either lower profit rates on investment or rescheduled loan repayments.
The issue of reopening purchase agreements for power generation plants built under the multibillion-dollar CPEC is unlikely to go away anytime soon.
In June of last year, the previous PTI government made a similar promise with another global lender, the World Bank (WB), in exchange for a $400 million loan.
According to government sources, Pakistani authorities gave the assurance to seek concessions from Chinese investors in order to eliminate one of the bottlenecks in the finalization of a staff-level agreement with the IMF.
They also stated that Pakistan had notified the global lender that it intended to renegotiate the CPEC agreements.
However, the chances of that happening are slim due to the process’s political sensitivity.
Because CPEC is the flagship project of the Chinese government’s Belt and Road Initiative, the Chinese leadership has already dismissed the possibility of restarting these deals.
According to the sources, the government assured the IMF that it would also look into the possibility of extending debt repayments on loans obtained by Chinese investors from financial firms in their home country to set up these plants.
One of the impediments to the early conclusion of the staff-level agreement was the IMF’s demand for specific commitments to reduce the cost of power generation and the circular debt, which had increased by Rs. 850 billion during the previous fiscal year.
The finance ministry and the IMF did not respond to requests for comment. The PTI government had also attempted to obtain similar concessions, but the Chinese leadership refused to extend them at the time.
To read our blog “China did not fund Pakistan’s four CPEC projects in H1 FY22,” click here.