Federal Planning Minister Asad Umar on Wednesday addressed concerns over loans Islamabad has received from Beijing under the China-Pakistan Economic Corridor project, saying Pakistan does not have a “Chinese debt problem” as claimed by a western think-tank in its report.
The planning minister claimed the study highlighted issues about transparency, debt sustainability, and ‘secret loans’ to Pakistan under CPEC in a news briefing accompanied by CPEC Authority chairman Khalid Mansoor.
The article also alleged, according to Umar, that Pakistan borrowed money from China at commercial rates.
In terms of the project’s operations, Umar stated that CPEC is a transparent initiative that is subject to legislative supervision.
The Senate Committee on Planning, the National Assembly, and the joint legislative body all get monthly briefings on the project, according to Umar, who also stated that Pakistan shared information on CPEC loans with the International Monetary Fund (IMF).
The minister stated that all information, tariffs, costs, and financing structures for electricity plants developed under CPEC were available on the NEPRA website.
In response to the accusations of “secret loans,” the minister said that the article 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 said that in the past, Pakistan provided sovereign guarantees to non-Chinese firms that set up Independent Power Plants (IPPs), but that no special treatment was given to Chinese companies.
During the presser, Umar divided the Chinese loans into two categories: private loans and government-to-government loans. He said power projects under CPEC have an average 4pc interest rate, adding the non-Chinese finance agencies, such as the World Bank and Asian Development Bank, lent Pakistan money on higher interest rates than China.
According to Umar, Chinese financing in power projects has “slightly” lower interest rates than other money lending agencies. About government-to-government loans, China lent Pakistan money under government concessional loans and preferential bias credit at 2pc, while bias credit was lent at 5.2pc, making an average of 2.4pc.
He said if grants given to Pakistan by China are to be included in the figures, it comes down to 1.98pc.
The planning minister further said that Chinese loans account for 10pc of Pakistan’s total debt, while as far as external debt liabilities are concerned, Chinese loans account for 26pc whereas 74pc is owed to western donors.
“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”.
According to Umar, Pakistan did not make a China-centric policy for its power projects as everyone was invited to invest in the sector.
CPEC Authority head Khalid Mansoor said in the Thar and Hub power projects, Pakistan bought equipment from US’ General Electric as China was “flexible”. He also termed the report “misleading”.
Speaking about Phase-II of CPEC, Umar said during the second phase, more jobs will be generated as investments will be made in the telecommunications, textile and agricultural sectors and added that another investment in the IT sector will be made that would create thousands of jobs.
The planning minister also said CPEC projects were delayed due to Covid-19 and Pakistan was willing to make CPEC a “regional corridor” instead of just a bilateral project.