The CPEC Project (China-Pakistan Economic Corridor) is in news again for all the wrong reasons. Pakistan Government has failed to make timely payments to four Chinese power projects installed under the Chinese Pakistan Economic Corridor (CPEC). And this has no doubt, frustrated the Chinese companies.
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According to The News the Pakistan Finance Ministry has not arranged the Rs 22 billion for setting up the revolving fund. “It has refused to say that Central Power Purchase Agency (CPPA) should arrange the required amount.”
Meanwhile, the CPPA officials have revealed that they are already facing a loss and circular debt has increased to Rs1.3 trillion. Now, the Finance Ministry is in hotwater as it has bluntly refused to make arrangements for the Rs22 billion.
Earlier, Islamabad has given assurances, under the CPEC framework, to the Government of China, that the Chinese investors would not be troubled with delayed payments on account of the liquidity crisis in the power sector. The News stated that “the Power Division is in the process to generate Rs200 billion loan against the 43 assets of the GENCOs and DISCOs and the Finance Ministry is hesitant to extend the sovereign guarantee.”
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The cash crunch is nothing new. Since June, there have been reports of CPEC hitting rock-bottom due to Pakistan’s economic crisis. The Dawn reported that contractors have stopped work on several projects of the CPEC after their cheques worth over rupees five billion bounced. The affected projects include Hakla-Dera Ismail Khan, Western Route of CPEC and all sections of Karachi-Lahore Motorway (KLM). Local industries and labour-force also have been hit. Kashif Zaman, the NHA spokesman said the matter had been taken up with the government.
Pakistan’s economic crisis saw China and Saudi Arabia giving a lending hand. According to a think tank, China’s US$2 billion loan helped avert the urgency of the situation and gave the government sufficient time to raise additional resources from and assess its fiscal commitments. The country’s crisis to some extent is also because of the United States and its allies placing Pakistan on the Financial Action Task Force’s (FAFT) ‘Grey List’. This limits Pakistan’s ability to raise funds in global financial markets.