Pakistan does not have a ‘Chinese debt problem’, says Umar

Asad Umar says CPEC is transparent, details available with parliament, IMF

Federal Planning Minister Asad Umar on Wednesday addressed concerns over loans Islamabad has received from Beijing under the China-Pakistan Economic Corridor project, saying Pakistan does not have a “Chinese debt problem” as claimed by a western think-tank in its report.

In a press conference flanked by CPEC Authority head Khalid Mansoor, the planning minister said the report raised questions on transparency, debt sustainability, and ‘secret loans’ to Pakistan under CPEC.

According to Umar, the report also claimed that Pakistan borrowed money from China on commercial rates.

peaking about the workings of the project, Umar said CPEC is a transparent project under parliamentary oversight.

The Senate Committee on Planning, NA body, and joint parliamentary body get reports about the project on a regular basis, Umar said, adding that Pakistan also shared information on CPEC loans with the International Monetary Fund (IMF).

Talking about power projects established under CPEC, the minister said all the information, tariff, cost and the financing structure was available on the NEPRA website.

Referring to the claims of ‘secret loans’, the minister said perhaps the report is calling the “sovereign guarantees” by the state as ‘secret loans’ as the Central Power Purchasing Agency (CPPA) is a state-owned authority.

Read Talks begin to roll over $3b CPEC debt

Umar maintained that Pakistan gave sovereign guarantees to Independent Power Plants (IPPs) set up by non-Chinese companies in the past, adding that no preferential treatment was meted out to Chinese companies.

During the presser, Umar divided the Chinese loans into two categories: private loans and government-to-government loans. He said power projects under CPEC have an average 4pc interest rate, adding the non-Chinese finance agencies, such as the World Bank and Asian Development Bank, lent Pakistan money on higher interest rates than China.

According to Umar, Chinese financing in power projects has “slightly” lower interest rates than other money lending agencies. About government-to-government loans, China lent Pakistan money under government concessional loans and preferential bias credit at 2pc, while bias credit was lent at 5.2pc, making an average of 2.4pc.

He said if grants given to Pakistan by China are to be included in the figures, it comes down to 1.98pc.

The planning minister further said that Chinese loans account for 10pc of Pakistan’s total debt, while as far as external debt liabilities are concerned, Chinese loans account for 26pc whereas 74pc is owed to western donors.

“Pakistan does have a debt sustainability challenge, but it is not due to Chinese loans,” Umar said, adding that it was due to “Pakistan’s own problems”.

According to Umar, Pakistan did not make a China-centric policy for its power projects as everyone was invited to invest in the sector.

CPEC Authority head Khalid Mansoor said in the Thar and Hub power projects, Pakistan bought equipment from US’ General Electric as China was “flexible”. He also termed the report “misleading”.

Read Govt dismisses reports CPEC facing delays

Speaking about Phase-II of CPEC, Umar said during the second phase, more jobs will be generated as investments will be made in the telecommunications, textile and agricultural sectors and added that another investment in the IT sector will be made that would create thousands of jobs.

The planning minister also said CPEC projects were delayed due to Covid-19 and Pakistan was willing to make CPEC a “regional corridor” instead of just a bilateral project.