Finance Minister Defends Payments to Chinese IPPs Under CPEC Energy Framework

Federal Finance Minister Miftah Ismail has defended giving payments to Chinese Independent power producers (IPPs) under the China-Pakistan Economic Corridor (CPEC) energy framework.

While replying to Questions after launching the Pakistan Economic Survey 2021-22 along with Federal Minister for Planning and Development, Ahsan Iqbal, Federal Minister for Energy, Khurram Dastgir, Minister of State for Finance, Dr Aisha Ghous Pasha, he said that government will make payment to Chinese IPPs under CPEC energy framework.

Earlier, It was reported that International Monetary Fund (IMF) has asked Pakistan’s government to renegotiate the China-Pakistan Economic Corridor (CPEC) energy deals before making payments of around Rs300 billion to the Chinese power plants, putting Islamabad in a tight spot.

He said that the government is giving only a 17 percent rate of return to IPPs dispelling the notion of a 34 percent return.

No one was ready to invest one dollar in Pakistan when China established energy-related projects under the CPEC framework adding that we thank Beijing that they invested in crucial times.

The Finance Minister also said that the staff-level agreement with the IMF is likely to be revived after the budget.

IMF program will likely to revive after the budget as the government shared everything with the Fund to ensure transparency and bridge the trust deficit, he added.

He also said that the economic growth of Pakistan has been forecasted at 5.97 percent as opposed to the target of 4.8 percent in 2021-22.

When there is a growth in the economy than the balance of payment crisis also emerged, he said, adding that the imports have been increased by 48 percent whereas an increase of Rs28 percent witnessed in Export due to which there is a trade deficit of $45 billion in this year.

The Finance minister also said that the foreign exchange reserves of Pakistan would improve by $2.4 billion to over $12 billion by early next week. “The reserves would increase after China rolls over $2.4 billion,” Miftah added.

He also said that the Brent oil prices in the international market recorded $123 due to which not only did the government enhance the petroleum prices by Rs. 60 but the price of every item has been increased.

While blaming the former PM for giving subsidies, the Finance Minister said that we have made tough decisions due to which the PML-N government saved Pakistan from the default.

Miftah Ismail said that the economy is on the road to stability. but we would have to ensure sustainable growth as inclusive growth help in improving the economic situation.

Regarding giving tax exemptions to the affluent class, the Finance Minister said that every government announces the tax exemptions to rich people as they established the industries which are important for the country.

Miftah said there would have been no gas crisis in the country had the PTI government signed long-term agreements for Liquefied Natural Gas (LNG) like the PML-N.

About the foreign direct investments, he said the investments dropped to $1.25 billion in the outgoing financial year against last year’s $2 billion.

The finance minister said that the tax-to-GDP ratio will remain at 11.1 percent which should be around 15 percent.

He further said that Pakistan will need to allocate Rs. 3,900 billion for debt-servicing in the upcoming financial year.

The Finance minister said that our government is also importing wheat from Russia as the cabinet allowed to import 3 million metric tons of wheat.

Federal Minister for Planning, development and Special Initiative Minister Ahsan Iqbal attributed the growth witnessed in the outgoing financial year to rebasing of the economy by the PTI government last year.

He added that the former government slashed the Public Sector Development Budget (PDSP) to Rs. 500 billion from Rs. 1000 billion was announced by the PMLN government in 2018.

He said the private sector investment in Pakistan depended on the money invested by the government in the public sector development projects and regretfully, the PTI government did not release any penny in the last quarter for development projects.

Iqbal criticized the former government for damaging the CPEC projects adding that the PML-N government had established nine Special Economic Zones but the PTI government failed to start work on five zones in the last three and half years.

He added that the PML-N has also expedited the work started by the PTI on dam projects. He added that industrial development, transport and communication were being focused on in the upcoming year.

Power Minister Khurram Dastgir said the PTI government failed to add electricity to the national grid during its rule.

“Had the PTI government set up the required 8,000MW projects, there would be no power outages today,” he added.

According to Dastgir, K-Electric’s 1250MW project using coal produced in Thar was also delayed. The minister added that the government would install power plants that would use indigenous energy for production to ease the balance of payment crisis.

Replying to the answers, Miftah said the economic growth through upgrading the Agri sector would be sustainable and that the government would also increase the salaries of the state employees to offset the impact of inflation.

He claimed that the government would not make any “unnecessary expenditures” and that it was available to be held accountable for budget expenditure.

“We will definitely announce an increase in salaries of the employees amid a record increase in inflation,” he said, adding that the petrol quota of government high-ups had been slashed as well to cut down on expenses.