Pakistan has decided to apply for a $ 2.7 billion loan from China for the construction of Package I of the Mainline-1 project of the China Pakistan Economic Corridor (CPEC).
Citing government officials, The Express Tribune reported that the sixth meeting of the ML-1 project funding committee, which includes the dualization and improvement of the 1,872 km railway from Peshawar to Karachi, decided that Pakistan would initially request China to sanction only $ 2.73 billion in loans out of the estimated total Chinese financing of about $ 6.1 billion.
This development comes even as Pakistan’s economy has been on the brink of bankruptcy for some time and the Covid-19 pandemic has made the situation worse.
Read also | Gilgit-Baltistan: Pakistan plays the role of supplicant to Chinese expansion
The Ministry of Economic Affairs has been ordered to formally send the Letter of Intent to China next week, as Beijing is expected to finalize its financing plans for next year by the end of the current month, The Express Tribune reported.
“In April this year, Pakistan had shared a condition sheet for Chinese loans, seeking an interest rate of 1 percent. But China has yet to formally respond to the request. They said that the Chinese authorities informally conveyed that the interest rate could be higher than the one mentioned in the term sheet, ”the sources told Pakistan newspaper.
In May, the former Pakistani ambassador to the United States, Husain Haqqani, wrote in an article in The Diplomat that Pakistan’s desire to maintain strategic relations with China has resulted in the construction of $ 62 billion worth of CPEC, which includes a set of infrastructure projects, stalled. in insufficient transparency.
“China’s constant strategic support, including assistance with Pakistan’s nuclear program, is often offered by the Pakistani military establishment favorably in contrast to the more conditional Pakistani alliance with the United States. But now it seems that China is not in Pakistan to help its people, but as a predatory economic actor, “he said.
The 278-page report from the “Power Sector Audit Committee, Circular Debt Reserve and Future Roadmap” listed malpractices to the tune of 100 billion Pakistani rupees (USD625 million) in the independent power generation sector, with at least a third of them related to Chinese projects.
According to the committee report, “Excessive installation costs of (Pakistani rupee) Rs 32.46 billion (approximately USD204 million) were allowed to the two coal companies [Chinese] plants due to misrepresentation by sponsors regarding [deductions for] the ‘Interest during construction’ (IDC), as well as the non-consideration of the early completion of the plants.
Apparently, the interest deduction was allowed for 48 months, while the plants were completed within 27 to 29 months, resulting in the right to an excess return on equity (RoE) of $ 27.4 million annually for the entire useful life of the project of 30 years in the case. of the Sahiwal plant.
.
