Pakistan eyes loans, infra deals during PM’s China visit

On the eve of the prime minister’s departure to Beijing, Pakistan decided to make a bullet payment to Chinese power plants for reducing their outstanding dues in a bid to break the ice to secure financing for infrastructure projects and a $600 million commercial loan.

Sources told that the energy ministry was processing Rs70 billion payments to the Chinese power plants, although the Prime Minister’s Office desired to clear at least Rs150 billion payments.

They said that the Ministry of Finance released Rs225 billion to the energy ministry out of the budgeted subsidies aimed at providing maximum room for making payments to the Chinese power plants.

However, no additional funds were provided and the expectation was that the energy ministry would create the space while remaining within the approved envelope. An official of the Energy Ministry confirmed only Rs70 billion in payments.

The Finance Ministry gave Rs70 billion in pending K-Electric arrears, Rs100 billion in advance claims of the subsidies and another Rs55 billion was released against Azad Jammu and Kashmir subsidy.

The sources said that in a meeting held a few days ago, Prime Minister Shehbaz Sharif had desired that at least Rs150 billion should be released to the Chinese power plants.

As of the end of April, the outstanding dues of the Chinese power plants set up under the China-Pakistan Economic Corridor (CPEC) amounted to Rs506 billion or $1.8 billion.

After he visited Beijing, Foreign Minister and Deputy Prime Minister Ishaq Dar had advised Prime Minister Shehbaz Sharif to clear at least Rs200 billion dues of Chinese IPPs from now till July. The money is being released on the intervention of Ishaq Dar and the Prime Minister.

The Ministry of Finance had already communicated to the International Monetary Fund that it did not have any plan to release money to CPEC IPPs over and above the available fiscal space in the budget.

The sources said that during his visit starting today (Tuesday) the Prime Minister was keen to make tangible progress on the Mainline-I project of the CPEC, Kohala hydropower Project, Azad Pattan hydropower project and Karakoram Highway expansion.

The government was also hopeful of getting $600 million in commercial loans from Beijing, which Chinese authorities had earlier refused to give due to Pakistan’s failure to honour the energy framework agreement.