Pakistan plans to ask China for payment relief for power projects funded by Beijing over the past eight years, the latest developing country struggling to repay debt under the Belt and Road Initiative. Road of President Xi Jinping.
In informal talks, Pakistan and China discussed easing debt repayment terms on a dozen power plants, according to a person with knowledge of the matter, who said Islamabad had not yet made a decision. formal request. The parties have probed Beijing’s willingness to spread debt payments, instead of reducing the return on equity, the person said, requesting anonymity because the plan is private.
A huge construction of Chinese-funded power plants in Pakistan, which was originally aimed at solving its electricity shortages, has resulted in a surplus that Islamabad cannot afford. China’s initiative-funded infrastructure projects in other developing countries, such as Sri Lanka and Malaysia, have suffered from problems ranging from high debt to corruption. A spokesman for the Chinese Foreign Ministry said he was not aware of Pakistan’s plan to seek debt relief.
“The energy projects have provided Pakistan with a large amount of stable and low-cost electricity, effectively reducing the overall price of electricity in Pakistan,” the spokesperson said in a written response. “China-Pakistan energy cooperation has progressed smoothly and brought real economic and social benefits.” Pakistan’s power division did not respond to a request for comment.
China has previously denied US criticism that the initiative leads to debt traps, while acknowledging that countries have had difficulty repaying their loans due to the pandemic-induced global recession. Last year, Beijing canceled interest-free loans to 15 African countries that were due to mature by the end of 2020, and it delayed further payments.
The Belt and Road program found new life in Pakistan last year with the signing of $ 11 billion in projects, most of which were aimed at renovating the country’s rail system.
While Chinese funding has helped Pakistan diversify its fuel supplies, it has also resulted in a surplus of electricity, which is problematic for the government in Islamabad as it is the sole buyer and pays producers even when they are not. not produce. To help solve the problem, the government negotiated with power plants, which produce about half of its electricity, to lower tariffs.