Most Commercial Rate CPEC Loans: Report – Journal


KARACHI: A significant portion of China’s development funding under the China-Pakistan Economic Corridor (CPEC) consists of loans at or near subsidy rates, according to a report released Wednesday by AidData, an international development agency based in the United States. Research Laboratory.

Shedding light on Beijing’s global development agenda, the report says Chinese CPEC loans account for 95.2% and 73pc of total commitments in the energy and transportation sectors, respectively.

China committed $ 34.4 billion in development finance to Pakistan between 2000 and 2017. Islamabad is the seventh largest recipient of Chinese development finance abroad with 71 projects currently worth $ 27.3 billion. In progress. The interest rate is 3.76 pc for an average loan with a maturity of 13.2 years (when full repayment with interest is due) and 4.3 years of grace period. He specifies.

Prime Minister’s Assistant Says All Corridor Projects Are Transparent And Do Not Involve Any Hidden Loans

In addition, the report asserts that Pakistan has received about half of all Chinese development finance in the form of “export buyer credit,” that is, money loaned by foreign investors. Chinese institutions in Pakistan to facilitate the procurement of equipment and goods to be purchased by Chinese implementing partners.

Up to 40% of China’s loans to Pakistan are now directed to state-owned enterprises, state-owned banks, special-purpose vehicles, joint ventures and private sector institutions. These Chinese loans do not appear on the government’s books “for the most part,” according to the report.

“However, they often benefit from an explicit or implicit form of government liability protection, which blurs the line between private and public debt,” he said, noting that the government has issued sovereign guarantees in certain cases. This means that the public treasury will repay the loans if the non-government borrowers fail to generate sufficient income to meet their financial obligations.

“In other cases … the government has provided a so-called guaranteed return on equity to borrowers. This type of guarantee is actually a form of hidden debt to China … These financial arrangements are attractive to the government because they do not need to be disclosed as public debt, ”the report said, adding that the economy is already in the “danger zone”. »On the basis of the public debt / GDP ratio of 92.8 pc.

Responding to criticism that Chinese investments are a hidden debt for the government, the Prime Minister’s Special Assistant (SAPM) for CPEC affairs Khalid Mansoor said all CPEC projects are fully transparent and no ‘involve no hidden loans.

“All projects are approved by Nepra (National Electric Power Regulatory Authority). Everything is in the open. The Nepra and National Highway Authority (NHA) websites list the capital costs of all projects, including Chinese funding. There is no hidden debt, ”he said.

China spends more than the United States

After CPEC, China spends 8.4 times more than the United States in Pakistan, compared to just 0.68 times in 2002, according to the report. While Chinese funding has mainly focused on hard infrastructure sectors like energy and transportation, US aid during the same period has focused more on civil society, social infrastructure, education, etc. . “Even at the height of Pakistan’s crippling energy crisis in the mid-2010s, only about 10% of US development assistance to Pakistan was in the energy sector,” the report says.

Mansoor said the country “is leveraging China’s expertise in agriculture and information technology sectors” after the recent 10th meeting of the Joint Cooperation Committee (JCC). “We are setting up new research centers for agriculture. We will improve our yields and the quality of our seeds with the help of the Chinese. We are about to start working in a targeted manner in many different areas, ”said SAPM.

Focus on Balochistan

The report noted that Chinese investments were concentrated in the Punjab until 2013. But they became more balanced in the four provinces, mainly due to “new spending in Sindh during the Sharif years”. Almost 59% of energy expenditure went to Sindh compared to 10.6% in Punjab between 2014 and 2017. “Balochistan received only a small proportion of CPEC projects,” he said.

“Their information is not up to date. We are concentrating as much as possible on Balochistan. The western road being developed under the CPEC will benefit the poorest and most remote regions of the province. Gwadar is experiencing tremendous development and a marketing plan is being developed to further develop the port of Gwadar, ”Mansoor said.

Posted in Dawn, September 30, 2021

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