CPEC not im­pos­ing in­stant bur­den of loan-re­pay­ment

The Financial Daily - - CONTINUATIONS -

IS­LAM­ABAD: The Plan­ning Com­mis­sion of Pak­istan has is­sued a clar­i­fi­ca­tion to ad­dress the con­cerns of the global com­mu­nity about Pak­istan's CPEC-re­lated Chi­nese debts.

The plan­ning com­mis­sion state­ment said: "CPEC is not im­pos­ing any im­me­di­ate bur­den with re­spect to loans re­pay­ment and en­ergy sec­tor out­flows" it said, ar­gu­ing all debt re­lat- ed out­flows will be out­weighed by the re­sul­tant ben­e­fits of the in­vest­ments to the Pak­istan econ­omy. The state­ment, how­ever, did not give any fig­ures on the size of the out­flows or their time­line.

"The present govern­ment, with mu­tual con­sul­ta­tion of Govern­ment of China is broad­en­ing the base and ex­pe­dit­ing pace of CPEC, within the broad pa­ram­e­ters of the al­ready ap­proved CPEC frame­work". A mech­a­nism is be­ing de­vel­oped to in­clude third party par­tic­i­pa­tion in CPEC, it added.

The com­mis­sion re­it­er­ated that CPEC was a "flag­ship" project and most ac­tive project of Belt and Road Ini­tia­tive where 22 projects worth a to­tal of $28 bil­lion have been ac­tu­al­ized over the past four years. "The project could not be com­pared with Chi­nese over­seas in­vest­ment in Sri Lanka or Malaysia as frame­works and fi­nan­cial modes of CPEC are al­to­gether dif­fer­ent in na­ture" the state­ment con­tin­ued.

CPEC fi­nances are di­vided in govern­ment to govern­ment loans, in­vest­ment and grants. In­fra­struc­ture sec­tor is be­ing de­vel­oped through in­ter­est free or govern­ment con­ces­sional loans, the com­mis­sion clar- ified. Gwadar Port is grant­based in­vest­ment which means the Govern­ment of Pak­istan does not have to pay back the in­vested amount for the de­vel­op­ment of the port.

En­ergy projects are be­ing ex­e­cuted un­der In­de­pen­dent Power Pro­duc­ers (IPPs) mode and fi­nances are mainly taken by the pri­vate com­pa­nies from China De­vel­op­ment Bank and China Exim Bank against their own bal­ance sheets, there­fore, any debt would be borne by the Chi­nese in­vestors in­stead of any obli­ga­tion on part of the Pak­istani govern­ment.

Pak­istan has opted for Chi­nese in­vest­ment un­der CPEC due to the fa­vor­able fi­nanc­ing ar­range­ments, it con­tin­ued. "China stepped for­ward to sup­port Pak­istan's de­vel­op­ment at a time when for­eign in­vest­ment had dried up, and eco­nomic ac­tiv­i­ties were be­ing crip­pled by en­ergy

short­ages and in­fra­struc­ture gaps."

The state­ment de­scribed CPEC as "an en­gine for eco­nomic growth and is ex­pected to in­crease Pak­istan's GDP growth by 2 to 3pc. CPEC has also fa­cil­i­tated in over­com­ing cru­cial en­ergy, trans­port in­fra­struc­ture and sup­ply chain bot­tle­necks."

More­over, the sources at the com­mis­sion said that the out­flows un­der Chi­naPak­istan Eco­nomic Cor­ri­dor (CPEC) will be­gin in 2021 and peak over the next three years with­out cre­at­ing a debt trap.

A plan­ning com­mis­sion of­fi­cial Thurs­day said the CPEC was rather be­ing ex­panded and its pace ex­pe­dited.

He said the debt re­pay­ments will start in 2021

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