Debt Diplomacy: Pakistan’s High-Stakes Talks with Beijing
Pakistan looking a way out from financial crackdown
Mohammad Aurangzeb finance minister of Pakistan. Financegovpk on X.
Beijing, July 25- To begin discussions on the structural reforms to the power sector recommended by the International Monetary Fund (IMF), Pakistan’s Finance Minister Muhammad Aurangzeb travelled to Beijing on Thursday, according to two official sources.
They reported that he spoke with his Chinese counterpart in Beijing and that the finance minister and Power Minister Awais Leghari are leading a delegation that will visit China to discuss several ideas, among them the reclassification of debt totalling almost $15 billion related to the energy sector.
The nations have been border-sharing allies for a very long time, Pakistan has previously been able to meet its external funding demands with the assistance of rollovers or disbursements on loans from China. Pakistan’s Finance ministry posted its statement on X- (20) Ministry of Finance, Government of Pakistan on X: “Senator Muhammad Aurangzeb Federal Minister for Finance & Revenue and Sardar Awais Ahmad Khan Laghari Minister for Energy (Power Division) had a meeting with Chinese Minister of Finance H.E. Lan Fo’an at Ministry of Finance of the People’s Republic of China in Beijing today. https://t.co/xGaFtRInw9” / X
China has pushed to overshadow, its bitterest rival The United States of America in global dominance over global issues like being a mediator in international diplomacy or financing countries, who are financially struggling to cash in with their objective. The biggest example is Islamabad, and the recent addition is the Maldives, which shook hands with China amid strained relations with its historical strategic partner and China’s foe India.
China and the Maldives have strengthened their strategic alliance with the promise of free military support. Furthermore, a deal with the Chinese research ship Xiang Yang Hong 3 strengthens bilateral ties and may alter the distribution of power and influence in the area. As a counterweight to India, China supports Pakistan in regional conflicts, most notably the Kashmir dispute. China subtly undermines India’s power and hegemony in the area by supporting Pakistan’s position.
About $25.4 billion has been invested by China in various projects in Pakistan during the past ten years. Railways, energy pipelines connected to the CPEC, and highways are a few notable examples of the infrastructure and energy sectors these projects are part of. Alongside Pakistan’s transmission network, the CPEC’s electricity projects have grown to around 6000 megawatts.
The Focus of China’s Belt and Road Initiative 2021, Credits: martin.armstrong@statista.com
China has established energy projects in Pakistan valued at more than $20 billion. The International Monetary Fund (IMF), which decided last month to provide a $7 billion rescue for the chronically indebted economies of South Asia, has recommended the measures. The IMF expressed concern about Pakistan’s power sector due to high rates of power theft and distribution losses, which have led to an accumulation of debt throughout the production chain.
Leghari stated that 100 billion Pakistani rupees ($360 million) a year in “circular debt “public liabilities that accumulate in the power sector as a result of subsidies and unpaid bills are being cut by the government through structural reforms. Raising power bills as part of the finance arrangement that concluded in April was one of the measures taken by the previous IMF bailout last year that impacted households in the poor and middle class.
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