Economic team meets China’s finance minister: Pakistan explains its approach to challenges

ISLAMABAD: Pakistan’s economic team comprising Senator Muhammad Aurangzeb, Federal Minister for Finance and Revenue and Sardar Awais Ahmad Khan Leghari, Minister for Power, on Thursday, discussed issues related to Pakistan’s economy and power sector with Chinese Minister of Finance LanFo’an in Beijing.

The prime minister has dispatched his team to Beijing for discussion on major financial cooperation issues including issuance of Panda Bonds, re-profiling of loans and conversion of imported coal power plants on Thar coal.

The sources said initially Panda Bonds would be up to $300 million, which will be enhanced to $700 or $750 million.

Key ministers interact with authorities in China: Bond, loans and coal high on the critical agenda

According to an official statement, the ministers briefed the Chinese minister on the government’s efforts to introduce tax and energy reforms in the system.

Both sides exchanged views to strengthen bilateral economic cooperation including boosting financial and banking cooperation.

Leghari and Aurangzeb also held a bilateral meeting with President of M/s Sinosure, Sheng Hetai in Beijing.

The ministers briefed the president on the government’s efforts on economic recovery and growth, energy and taxation sectors.

Both sides also exchanged views to strengthen bilateral economic cooperation especially financial and banking cooperation. The two sides also discussed expanding CPEC and role of private sector, as it transitions to its next phase of its implementation.

China’s insurance company, M/s Sinosure has reportedly shown willingness to implement 700 MW Azad Pattan Hydropower Project and 1,124 MW Kohala Hydropower project worth billions of dollars on the guidance from Beijing.

Pakistan’s successive governments made efforts to commence both key hydel projects but the Chinese insurance company was reluctant to implement these projects mainly due to the payments issues of existing companies and gigantic circular debt which is now hovering around Rs2.6 trillion.

In May 2024, Sinosure has received mandatory guidance from the Government of China for the implementation of Azad Pattan and Kohala HPP; at the same time, it is also important for Pakistan to urge the Chinese investors/enterprises to submit Letter of Intent (LoI) for these projects; LoI for Azad Pattan, submitted by China Gezhouba Group Company (CGGC) in April 2023 has expired. Reuters adds: Finance Minister Muhammad Aurangzeb on Thursday arrived in Beijing to open talks on power sector structural reforms suggested by the International Monetary Fund (IMF), two government sources said.

He held a meeting with his Chinese counterpart in Beijing, they said, and added that the finance minister together with Power Minister Awais Leghari is leading a delegation, which will take up several proposals with the Chinese side, including reprofiling of nearly $15 billion energy sector debt. The countries, which share a border, have been longtime allies.

Rollovers or disbursements on loans from China have helped Pakistan meet its external financing needs in the past.

Pakistan’s finance ministry, junior Finance Minister Ali Pervaiz Malik and the Chinese finance ministry didn’t respond to a request for a comment.

Both the finance and power ministers told Reuters in interviews last week that they will be discussing the power sector reforms in their Beijing visit, though they did not specify the timing.

China has set up over $20 billion worth of planned energy projects in Pakistan.

The reforms has been suggested by the International Monetary Fund (IMF), which this month agreed on a $7 billion bailout for the heavily indebted South Asian economy.

Pakistan’s power sector has been plagued by high rates of power theft and distribution losses, resulting in accumulating debt across the production chain - a concern raised by the IMF.

The government is implementing structural reforms to reduce “circular debt” - public liabilities that build up in the power sector due to subsidies and unpaid bills - by 100 billion Pakistani rupees ($360 million) a year, Leghari has said.

Poor and middle-class households have been affected by a previous IMF bailout reached last year, which included raising power tariffs as part of the funding programme that ended in April.

Copyright Business Recorder, 2024