Report: Pakistan promises IMF that it will not be affected by CPEC energy agreements


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ISLAMABAD: PakistanThe IMFAccording to a media report from Saturday, the government would seek concessions from Chinese investors in the China-Pakistan Economic Corridor power plants. These could include lowering the profit rates for investment or rescheduling of loan repayments.
According to government sources, Pakistani officials gave assurances to Chinese investors that they would seek concessions. This was to eliminate one of the obstacles in finalizing a staff-level agreement between the International Monetary Fund and the Pakistani authorities.
This week, Pakistan and IMF reached preliminary staff-level agreements on the seventh and eighth combined reviews for a USD 6-billion loan facility to cash-strapped Pakistan.
The agreement allows for the release the long-awaited USD 1.17 Billion loan tranche that was held up earlier in the year.
The report stated that it is unlikely that the issue of reopening power generation plant purchase agreements under the multibillion dollar CPEC will be solved in the near future.
Imran led the previous government Khan had also made a similar commitment with another global lender – the World Bank – for a USD 400 million loan in June last year.
The global lender was informed that Pakistan had told it that it would renegotiate the CPEC agreements. Due to the political sensibilities involved, however, there is little chance of this happening.
The CPEC is a USD 60 billion flagship project of the Belt and Road Initiative of the Chinese government – a reason that the Chinese leadership has already ruled out the possibility of reopening these deals.
China’s Xinjiang Province is connected to Gwadar Port in Balochistan by the CPEC, giving it direct access to Arabian Sea.
According to sources, the government assured the IMF it would continue to investigate the possibility of seeking an extension on debt repayments for loans that Chinese investors received from financial institutions in the country in order set up these plants.
One of the problems in the quick conclusion of the staff level agreement was the fact that IMF authorities wanted to make clear commitments to reduce power generation costs and the circular debt which had increased by another Rs. 850 billion in fiscal year last.
According to the newspaper report, neither the IMF nor the finance ministry responded to requests for comments.
In the past, IMF has linked outstanding energy payments to Chinese power stations with concessions extended to previous governments by non-CPEC project. Pakistan owes the Chinese independent power producers (IPPs), and the IMF was tracking every payment.
The 11 Chinese IPPs have a total capacity of 5,320 MW and were established with an investment of USD 10.2 million. The IMF denied asking Pakistan to renegotiate CPEC IPPs contracts last month but stated that it supports the government’s multipronged strategy for restoring the energy sector’s viability.
It had added that the move shared the burden of restoring viability across all stakeholders – the government, producers, and consumers.
Pakistani authorities are worried about the WestIt would not change its policy of continuing to press Pakistan on the issue CPEC, and continue to pursue its agenda through diplomatic channels as well as international financial institutions. Pakistan joined the IMF programme in 2019. However, only half of the funds have been disbursed so far as Islamabad has failed to meet its targets.
The February disbursement was the last. A review was scheduled for March. However, the government of Khan, the ousted prime minister, introduced fuel price caps that threw off fiscal targets and halted the programme.


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