Pakistan asked China to defer the payment of existing loans worth $10.735 billion and provide an additional loan of $10 billion as a deposit fund, sources told ProPakistani. If approved, Pakistan will owe China over $20.74 billion in loans and deposit funds.
During Prime Minister Imran Khan’s recent visit to China, the officials of the Finance Ministry proposed the Chinese government to defer the payment of safe deposits worth $4 billion and commercial loans worth $6.735 upon maturity.
A safe deposit worth $2 billion will mature on 23 March 2022 and a commercial loan worth $2.235 billion will mature on 25 March 2022. The Finance Ministry had also sent the requests for deferring the payment of this safe deposit and commercial loan in January this year. The rest of the safe deposits and commercial loans will mature later.
Furthermore, the State Bank of Pakistan (SBP) also suggested China to increase the currency swap arrangement beyond $15 billion.
Pakistan also requested China to allow it to use its share of the Special Drawing Rights (SDRs) of the International Monetary Fund (IMF) allocated to its members in August 2021 to help them tackle the COVID-19 pandemic. China’s portion in the allocation is SDR 29.22 billion and Pakistan proposed it to use it either through a bilateral arrangement or a mechanism formulated by the IMF.
Pakistan had renegotiated Power Purchase Agreements (PPAs) with Independent Power Producers (IPPs), resulting in a significant decrease in the cost of electricity from these IPPs.
Pakistan also proposed to renegotiate the PPAs with IPPs operating under CPEC on similar lines as well. If the PPAs are successfully renegotiated, the country will save $14.29 billion on account of electricity cost over the life period of these IPPs.
However, China recommended Pakistan to extend the relief of $14.29 billion through any other mechanism instead of renegotiating the PPAs of IPPs under CPEC.
The Finance Ministry has directed the Pakistani Ambassador to China, Moin ul Haq, to follow up these proposals with concerned Chinese authorities as these proposals are linked with the country’s external account stability and budgetary requirements.