Federal Planning Minister Asad Umar on Wednesday (today), talked about the concerns regarding loans received by Pakistan from Beijing under the China-Pakistan Economic Corridor project (CPEC).
Asad Umar mentioned that Pakistan does not contain a “Chinese debt problem” proclaimed by a western think-tank in its report.
The Planning Minister claimed the report highlighted doubts about transparency, debt sustainability, and ‘secret loans’ to Pakistan under CPEC during a press briefing hosted by CPEC Authority Chairman Khalid Mansour.
The report also stated that Pakistan borrowing money from China on commercial rates, Umar added.
Discussing the projects working, Umar mentioned that CPEC is a transparent project under the supervision of the Parliament and on a regular basis, the Senate Committee, the NA body, and the joint parliamentary body receive reports on the project’s planning, Umar added,
“Pakistan also shared loan information of CPEC with the International Monetary Funds (IMF),” he further added.
The minister stated that all information, tariffs, costs, and financing structures for power projects built under CPEC were available on the NEPRA website.
In response to the claims of “secret loans,” the minister suggested that the report may be referring to the state’s “sovereign guarantees” as “secret loans” because the Central Power Purchasing Agency (CPPA) is a state-owned entity.
Umar classified Chinese loans into two categories during the press conference: private loans and government-to-government loans. He claimed that the average interest rate on CPEC power projects is 4% and that non-Chinese finance agencies such as the World Bank and the Asian Development Bank granted Pakistan money at greater rates than China.
Umar asserted that Pakistan provided sovereign guarantees to Independent Power Plants (IPPs) which were set up by non-Chinese companies beforehand, adding that special treatment was provided to Chinese companies.
Umar mentioned that Chinese financing in power projects has “slightly” moderate interest rates as compared to other money lending agencies.
Further talking about government-to-government loans he added, China lent money to Pakistan under government concessional loans and preferential bias credit at 2%, while bias credit was lent at 5.2%, for an average of 2.4%, and if grants provided by China are included in the figures, it drops to 1.98%, According to Umar.
“Pakistan does have a debt sustainability challenge, but it is not due to Chinese loans,” Umar said, adding that it was due to “Pakistan’s own problems“. Said Umar.
Minister further stated that Chinese loans account for around 10% of Pakistan’s overall debt, whilst foreign debt liabilities account for roughly 26% of Pakistan’s entire debt, with the remaining 74% payable to western donors.
According to Umar, China was not made a centric policy by Pakistan for its power projects as everyone was allowed to invest in the sector.
CPEC Authority head Khalid Mansoor termed the report “misleading” and added that in the Thar and Hub power projects, Pakistan bought equipment from US’ General Electric as China was “flexible”.
Late in the press conference, Umar talked about the second phase, of CPEC and said that there will be more jobs opportunities as investments are expected in telecommunications, textile and agricultural sectors and further added that another investment in the IT sector will generate thousands of jobs.
The Planning Minister also said that Covid-19 caused a delay in the CPEC project and Pakistan intends to make CPEC a “regional corridor” instead of just a bilateral project.