ISLAMABAD: Pakistan is seeking to gain debt relief on Chinese loans taken to fund power projects that Beijing has financed over the last eight years.
Pakistan is the latest developing nation that’s struggling to repay debt under President Xi Jinping’s Belt and Road Initiative. According to a report, the two countries have discussed easing terms on the repayment of debt on about a dozen power plants in informal talks.
Pakistan is yet to make a formal request, the report said. The parties have discussed Beijing’s willingness to stagger debt payments as opposed to lowering equity returns, a person with knowledge on the plan was quoted as saying in the report.
Chinese-financed power plants in Pakistan were originally intended to solve Pakistan’s power shortages. A spokesperson at China’s Ministry of Foreign Affairs said they aren’t aware of Pakistan’s plan to seek debt relief.
“Energy projects have provided Pakistan with a large amount of stable and low-priced electricity, effectively reducing the overall price of electricity in Pakistan,” the spokesperson said in a written response. “China-Pakistan energy cooperation has progressed smoothly and brought about real economic and social benefits,” the spokesman added.
The publication said China has previously denied US criticism that the initiative leads to debt traps, while acknowledging that countries have had difficulties repaying loans due to the pandemic-induced global recession.
China has cancelled interest-free loans to 15 African countries last year which were due to mature by the end of 2020, and it has delayed other payments.
China’s financing in Pakistan has focused on power sector. The program had found new life in Pakistan last year with the signing of $11 billion worth of projects, mostly to revamp the railway system.
