Pakistan plans to ask China for relief on payments for power projects Beijing financed over the past eight years in a bid to ease repayment of debts, Bloomberg reported on Tuesday.
According to the report which points out that Pakistan is the “latest” developing nation struggling to repay debt under the Belt and Road Initiative (BRI), officials from China and Pakistan have discussed easing terms on the repayment of debt on about a dozen power plants. However, the government has not made a formal request to Beijing regarding the matter as yet.
The international journal reported that the parties have canvassed Beijing’s willingness to stagger debt payments, as opposed to lowering equity returns.
“An enormous build-out of Chinese-financed power plants in Pakistan, which was originally intended to solve its electricity shortages, has resulted in a surplus that Islamabad isn’t able to afford. Infrastructure projects funded by China’s initiative in other developing nations, such as Sri Lanka and Malaysia, have suffered issues ranging from heavy debt loads to corruption,” the report adds.
Meanwhile, China rejected US criticism that the initiative leads to debt traps while acknowledging that countries have had difficulties repaying loans due to the pandemic-induced global recession.
Quoting a person privy to the matter, the report has claimed that Pakistan will formally make the request to defer debt payments to China, as well as other plants that were part of the latest power policy after it concludes deals with those local power producers to reduce electricity tariffs.
The BRI, which was launched in 2013 as the signature foreign policy initiative of President Xi Jinping, is aimed at building infrastructure and boosting China’s influence around the world. Most of the 138 countries that have officially signed up to the BRI are developing nations, many with the weakest credit ratings in the world.
China releases few of the financial details in BRI infrastructure projects. But RWR Advisory, a Washington-based consultancy, estimated that the total announced lending by Chinese financial institutions to BRI projects since 2013 was $461bn. Even allowing for the low completion rates of announced projects, such a sum makes the BRI by far the biggest development initiative in the world.
Several of the countries that have applied to Beijing for debt relief are understood to be in Africa, where the Chinese government, banks, and contractors have lent $143bn between 2000 and 2017, according to the Johns Hopkins School of Advanced International Studies.
