*ISLAMABAD – The Planning Commission of Pakistan has rejected the localand the international media and institutions agenda over the CPEC debtburden on Pakistan.*
*PC issued a clarification to address the concerns of the global communityabout Pakistan’s CPEC-related Chinese debts.*
The planning commission statement said: “CPEC is not imposing any immediateburden with respect to loans repayment and energy sector outflows” it said,arguing all debt related outflows will be outweighed by the resultantbenefits of the investments to the Pakistan economy. The statement,however, did not give any figures on the size of the outflows or theirtimeline.
“The present government, with mutual consultation of Government of China isbroadening the base and expediting pace of CPEC, within the broadparameters of the already approved CPEC framework”. A mechanism is beingdeveloped to include third party participation in CPEC, it added.
The commission reiterated that CPEC was a “flagship” project and mostactive project of Belt and Road Initiative where 22 projects worth a totalof $28 billion have been actualized over the past four years. “The projectcould not be compared with Chinese overseas investment in Sri Lanka orMalaysia as frameworks and financial modes of CPEC are altogether differentin nature” the statement continued.
CPEC finances are divided in government to government loans, investment andgrants. Infrastructure sector is being developed through interest free orgovernment concessional loans, the commission clarified. Gwadar Port isgrant-based investment which means the Government of Pakistan does not haveto pay back the invested amount for the development of the port.
Energy projects are being executed under Independent Power Producers (IPPs)mode and finances are mainly taken by the private companies from ChinaDevelopment Bank and China Exim Bank against their own balance sheets,therefore, any debt would be borne by the Chinese investors instead of anyobligation on part of the Pakistani government.
Pakistan has opted for Chinese investment under CPEC due to the favorablefinancing arrangements, it continued. “China stepped forward to supportPakistan’s development at a time when foreign investment had dried up, andeconomic activities were being crippled by energy shortages andinfrastructure gaps.”
The statement described CPEC as “an engine for economic growth and isexpected to increase Pakistan’s GDP growth by 2 to 3pc. CPEC has alsofacilitated in overcoming crucial energy, transport infrastructure andsupply chain bottlenecks.”
Moreover, the sources at the commission said that the outflows underChina-Pakistan Economic Corridor (CPEC) will begin in 2021 and peak overthe next three years without creating a debt trap.
A planning commission official Thursday said the CPEC was rather beingexpanded and its pace expedited.
He said the debt repayments will start in 2021 with about $300-400 millionannually and gradually peak to about $3.5 billion by fiscal year 2024-25before tapering off with total repayments to be completed in 25 years.