Ministers to head to China to try to get $15.4bn IPPs debt rescheduled

ISLAMABAD: Minister for Finance Mohammad Aurangzeb and Minister for Power Awais Leghari are all set to depart for China by the end of next week to explore possibility of rescheduling of Chinese IPPs debt of $15.4 billion.

On the other hand, China and Pakistan have kick-started the second phase of China-Pakistan Economic Corridor (CPEC). Both sides have agreed to hold a financing committee meeting to finalize the construction of Mainline (ML-1) in a phased manner. The ML-1 could not be started since the inception of CPEC in 2014-15. Now it will be a challenge for Pakistan to seek foreign funding of over $3 billion from China and simultaneously pursue the IMF programme of $7 billion under the Extended Fund Facility (EFF).

“Ministers for Finance and Power will depart for China next week to make a request to China to reschedule Chinese IPPs debt by extending the tenure of the amount by five years, from 2036 to 2041,” top official sources confirmed while talking to The News here on Thursday.

Pakistan’s total outstanding repayment to Chinese IPPs will be standing at $15.4 billion till 2036; Islamabad is required to pay back $2.23 billion in 2024, $2.13 billion in 2025, $2.03 billion in 2026, $1.89 billion in 2027, $1.57 billion in 2028, $1.3 billion in 2029 and $1.01 billion in 2030. After 2030, the Chinese IPPs repayment will start reducing and will be standing at $0.96 billion in 2031, $0.78 billion in 2032, $0.57 billion in 2033, $0.5 billion in 2034, $0.37 billion in 2035 and $0.02 billion in 2036 under the existing arrangement.

Pakistan now desires to extend the tenor of five years for Chinese IPPs repayments and if agreed by the Chinese side, the repayment schedule would witness staggering in repayment obligations. “It’s hard to convince the Chinese side but there is need to make a formal endeavour in this regard,” said a senior official.

Official estimates worked out by Pakistani side that might be presented to the Chinese side show that Pakistan would be making a request to stagger the outstanding amount of Chinese IPPs and if granted extension of five years, then the outstanding liability would go up to $1.63 billion in 2024, $1.55 billion in 2025, $1.48 billion in 2026, $1.41 billion in 2027, $1.34 billion in 2028, $1.28 billion in 2029, $1.22 billion in 2030, $1.16 billion in 2031, $1.09 billion in 2032, $0.94 billion in 2033, $0.81 billion in 2034, $0.65 billion in 2035, $0.62 billion in 2036, $0.51 billion in 2037, $0.47 billion in 2038, $0.33 billion in 2039, $0.25 billion in 2040 and $0.01 billion in 2041.

With this staggering in tenor of repayments, the overall repayment will be increased from $15.4 billion to $16.62 billion with an extension of five years from 2036 to 2041.