Cash-starved Pakistan engages in debt ‘reprofiling’ talks with China
Islamabad — Pakistani Finance Minister Muhammad Aurangzeb said Sunday that he had engaged in "very constructive" talks with Chinese counterparts on rescheduling billions of dollars in debt owed to China, but he reported no immediate progress.
Islamabad is asking that Beijing, its close ally, delay at least $16 billion in energy sector debt repayments and extend the term of a $4 billion cash loan facility because of Pakistan’s economic troubles and dwindling foreign exchange reserves.
Aurangzeb, shortly after returning from a multi-day visit to the neighboring country, held a news conference in the Pakistani capital, sharing details of his meetings with Chinese Finance Minister Lan Fo’an and the central bank governor, among others.
“We presented the debt reprofiling proposal to them,” Aurangzeb said without specifying any amount. He said that his government is seeking to reschedule the debt for 10 China-funded energy-related projects in Pakistan.
“We’ll have to go project-by-project and work with the central bank in China… We’ll also appoint a local adviser (in China) instead of leading the process from Islamabad,” the minister added.
Aurangzeb said that in addition to China, Pakistan was in talks with Saudi Arabia and the United Arab Emirates in seeking an extension on the existing $5 billion and $3 billion cash loan facilities, respectively.
He stated that his government was confident in securing these crucial extensions before an International Monetary Fund executive board meeting to grant final approval for a newly negotiated $7 billion loan for Islamabad.
“I want to assure you that external financing and assurances will be forthcoming between now and the IMF board approval,” the minister said.
The Washington-based global lender announced earlier in July that it had reached a preliminary agreement with Pakistan for a 37-month loan of $7 billion under the IMF’s Extended Fund Facility arrangement.
The IMF stated that the agreement “is subject to approval by its executive board and “the timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners.” It did not specify a date for the board meeting.
Some of the power projects in focus are built under the China-Pakistan Energy Corridor, or CPEC, a massive project aimed at improving Pakistan’s infrastructure for better trade with China and further integration of the countries of South Asia.
CPEC has, over the past decade, brought more than $25 billion in Chinese investment and loans to Pakistan as part of Beijing’s global Belt and Road Initiative, which aims to improve connectivity, trade, communication, and cooperation with participating countries.
Pakistani and Chinese officials deny allegations the mega project has deepened Islamabad’s economic troubles.