Pakistan's Prime Minister Imran Khan (2nd R) attends talks with China's President Xi Jinping (not pictured) at the Great Hall of the People in Beijing on November 2, 2018. Photo: AFP / Thomas Peter / Pool
Asia Times: Pakistan begs China for power debt forgiveness
Islamabad may decline to pay Chinese banks it owes billions in perceived as onerous take-or-pay power production contracts
PESHAWAR – Pakistan’s debt problems are escalating as liabilities due on China-funded energy projects established under the China-Pakistan Economic Corridor (CPEC) surpass $31 billion and Beijing declines to restructure $3 billion in liabilities coming due that Islamabad possibly won’t pay.
The debt load, owed largely for the building of independent power producers (IPPs) on take-or-pay power generation contracts, is substantially more than the $19 billion in total invested in the plants, according to reports and industry analysts.
Pakistan is obliged to pay $5.9 billion to the power companies for take-or-pay capacity payments alone over the next four years by 2025. Those will entail more pay than take at current power usage rates.
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Update: Pakistan economic crisis intensifies as China refuses to provide debt relief (ANI)
WNU Editor: Three days ago I put up this post .... China’s Bond Defaults Are Exploding. What Does This Mean? (May 28, 2021). In short .... China is getting rid of all of its bad debts, zombie companies, and non-functioning assets.
The Chinese are now implementing this policy towards countries that are deeply in debt to them, and who want to renegotiate better terms. Pakistan is one of those countries.
But Beijing is treating these countries the same way that they are dealing with their own companies and institutions who are deeply in debt and who want to make a deal. Bottom line. There is going to be no renegotiating or debt forgiveness. You pay what you owe, and forget about getting any debt forgiveness.
This is big news, and it will have global implications.
As for Pakistan. They must have got the message last month when the Chinese said no to an expected loan for a massive infrastructure project .... China reluctant to clear $6 billion loan for CPEC project over debt concern (Hindustan Times). Pakistan expected that money, and it must have come as a big surprise to them when China said no. Since then it has been all downhill for Pakistan, with access to credit becoming very difficult to obtain.
