Pakistan owes $6 billion to China under CPEC

ISLAMABAD: Pakistan needs to pay back six billion dollars under debt obligations of c initiative over the next two decades, the planning ministry said on Wednesday.

“Government of Pakistan’s financial liability is only to the tune of $6 billion comprising of low interest loans and grants in infrastructure projects spread over 20 to 25 years payback period,” the ministry of planning, development and reform said in a statement, referring to China-Pakistan Economic Corridor (CPEC) projects.

“CPEC outflows would start from the year 2021 and spread over 20 to 25 years.”

CPEC is a flagship and most active project of Belt and Road initiative with the corridor finances comprising of government-to-government loans, private investment and grants. Currently, 22 CPEC projects are progressing at various stages of implementation.

The planning ministry refuted the claims that the liability of Pakistan under CPEC amounts to $40 billion.

The ministry said the energy projects are being executed under independent power producers’ mode and finances are mainly taken by the private companies against their own balance sheets.

“Therefore, debt would be borne by the investors instead of any obligation on part of the Pakistani government,” it added. “The dividends of the energy sector projects are also based on profit and loss and are subject to individual company’s financing policies.”

Debt accruing is also amortised in the financial structure and is included in the project viability analysis and business plans of the private enterprise.

Therefore, CPEC is not imposing any burden with respect to loans repayment and energy sector outflows. The planning ministry said the resultant benefits of the investments to the Pakistani economy would far outweigh the outflows.

The government has prepared the data on the inflow/outflow in consultation with relevant stakeholders, including ministry of finance. “(It) is available in public domain for discussion with relevant institutions.

The ministry said China and Pakistan decided to broaden the scope and expedite pace of CPEC. “Innovative financing mechanisms are being developed for financing new projects in CPEC,” it added.

“Therefore, the inflow of CPEC projects will continue to increase in the form of private investment in special economic zones, which were prioritised in the recent JCC (joint cooperation committee) meeting, energy projects through indigenous resources, agriculture, socio-economic development sector and infrastructure based on pragmatic planning and due diligence on both the sides.” The 8th meeting of the JCC on CPEC was held last week in Beijing.