Asad Umar dismisses report on CPEC transparency, hidden debt

Minister for Planning, Development, and Special Initiatives Asad Umar rejected the report of a US-based think tank regarding China-Pakistan Economic Corridor (CPEC), saying that "misinformation is being spread that leads to uncertainty".

Talking to the media on Wednesday, Umar said details on CPEC have been shared with parliament on a number of occasions.

Umar's statement comes after a US think tank report said that there is lack of transparency in CPEC projects.

In response, Umar said CPEC committees in the Senate and National Assembly as well as a joint committee of the parliament are regularly provided information pertaining to CPEC projects.

The federal minister said information and tariff rates applied on projects can be accessed through the National Electric Power Regulatory Authority (NEPRA).

He said being part of the International Monetary Fund (IMF) program, the government has also shared information with the international lender.

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The federal minister added that Chinese debt constitutes only 26% of the total external liabilities of Pakistan. "Pakistan has a debt servicing challenge which we are meeting," said Umar, adding that they do not have any problem with Chinese debt.

Regarding hidden debt in power projects, Umar said, being the power purchaser, the Government of Pakistan has provided sovereign guarantees to Independent Power Purchasers (IPP) for projects being built under CPEC.

“Any IPPs operating in the country, whether local or international, are provided sovereign guarantees to install their projects, so this is not something new or hidden for CPEC,” he said.

Umar added that the US think tank report says the financing of these projects is very costly.

“Firstly, there are loans taken for power projects by private entities, and then there are loans taken by the government under which it conducted other infrastructure projects of CPEC.”

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Regarding loans taken on power projects financed by Chinese lenders, Umar said that the average rate of interest charged has been LIBOR +4%.

"This is in comparison to financing provided by international institutes such as World Bank’s private lending arm -- the International Finance Corporation (IFC) -- the Asian Development Bank (ADB), Germany’s DEG, and other multilateral agencies where the average rate of interest was LIBOR +4.25%.

"Government loans were taken in the shape of concessional ones at 2%, preferential buyers’ credit at 2%, and a small part is also made up of buyers credit taken at 5.2%. The weighted average of these loans taken is 2.4%,” said Umar.

He said China has also provided grants to execute different CPEC projects. "For example, a vocational training institute has been established in Gwadar with the Chinese grant."

The planning minister acknowledged that some CPEC projects were delayed due to the Covid-19 pandemic, while a majority were completed on time.

He said both Pakistan and China welcome investment from other countries in this project, adding that this could become a regional project instead of a bilateral one.

Meanwhile, on Tuesday, Business Recorder reported that Chinese companies are reportedly reluctant to engage in the second phase of CPEC due to failure to meet the terms and conditions agreed with existing companies especially in the power sector, and has bandied charges of enticement.

During background interaction with authorities, it was revealed that the government is unable to clear the entire overdue amount of Rs220 billion and is now trying to stagger the amount and most probably may opt for the same formula used to pay other IPPs i.e. in two installments - 40 per cent and 60 per cent.