ISLAMABAD: Pakistan’s Finance Minister Muhammad Aurangzeb has sought an 8-year extension from China in the repayment period for loans related to the China-Pakistan Economic Corridor (CPEC) and the energy sector, local media reported.
Aurangzeb made the request in meetings with Chinese officials. The total loans for CPEC and nuclear power plant projects are worth around $17 billion, media reported.
Pakistan is not only negotiating with China to extend the loan repayment period but also a reduction in the interest rate on these loans. If China approves the request, it could result in a 6-7 rupee per unit decrease in electricity cost in Pakistan.
The electricity tariff from Chinese power plants could also be reduced by 3-4 rupees per unit. If Pakistan’s request is approved, it could lead to a 5 percent reduction in the cost of the loans.
Pakistan has to make over $2 billion in loan repayments for the energy sector, which it is seeking to defer due to economic hardships.
The developments come as Pakistan’s energy sector debt is increasing due to capacity payments to power generation companies. Reports show that Pakistan pays billions of rupees without consuming electricity.
According to a local media report, representatives from three major Chinese companies have said that the decision to restructure the energy debt will depend on the outcome of talks between the Chinese banks and the Pakistani authorities.
The representatives of three major Chinese companies have said that they are not willing to renegotiate the terms and conditions of their agreements with Pakistan.
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However, the government of Pakistan is seeking concessions from the Chinese authorities on the energy debt that was taken to build nuclear power plants and the CPEC energy projects.
Pakistan has sought an extension of up to 8 years on the repayment of this energy debt, changing the lending currency from US dollars to Chinese yuan, and requesting a reduction in the interest rates on this debt.
The Pakistani Finance Minister is traveling to China to meet with Beijing authorities to negotiate these requested changes to the energy debt repayment terms.
