ISLAMABAD — In a huge relief to the Pakistani government, China has agreed to reschedule over $2 billion in publicly guaranteed debt for a period of two years, as the latter works to restore its foreign exchange reserves through new loans and the rollover of maturing debt.
According to top Pakistani officials, the revised terms of the deal negotiated between Islamabad and Beijing were accepted by the Economic Coordination Committee (ECC) of the Cabinet on Thursday.
The meeting was presided over by Finance Minister Ishaq Dar.
In Karachi, Pakistan, there are two nuclear power stations with a total generation capacity of 2,117 megawatts. The Chinese loan of $6.5 billion brings the total cost of the reactors to $9.5 billion. China’s Export-Import Bank made the credit available.
Over $625 million was due to mature this fiscal year out of a total of $2 billion, however that will no longer happen. According to the top officials, China has agreed to delay repayment on the $6.5 billion in government guaranteed debt, almost $2 billion of which was due within the next two years.
New loans and debt rollovers have been repeated ways in which China has assisted Pakistan in meeting its debt obligations. During the time that the IMF plan was on hold, China preemptively refinanced its $1.3 billion in commercial loans in June, which prevented Pakistan from defaulting on its international financial obligations.
Pakistan’s gross official foreign exchange reserves have increased from $4.5 billion prior to the IMF deal’s signing to the current level of $8.7 billion.
There was no official announcement regarding the ECC’s approval of the amended agreement with China from the Ministry of Finance.
Additional funding in the amount of Rs200 million was granted by the ECC as a technical supplementary grant for the Special Investment Facilitation Council (SIFC).
The council is a mix of civilian and military officials and was set up to encourage investment in the defence, agriculture, mineral, information technology, and energy industries from the Gulf Cooperation Council and other countries. Foreign investment projects are being led by officials from a number of government departments who have been stationed at the SIFC Secretariat in the PM Office.
The ECC was told that “the SIFC Secretariat has not yet become operational due to non-allocation of the budget,” which is necessary for conducting the Council’s day-to-day operations.
The council asked for an extra Rs200 million in funding and for the restriction on furniture purchases to be lifted.
The ECC reviewed a synopsis from the Ministry of Information on the topic of taxing movie theatres for power. The idea to charge movie theatres electricity at industrial rates was accepted by the ECC in an effort to revitalise Pakistan’s film industry.
Vegetable ghee/cooking oil is exported from export processing zones to Afghanistan via land route, and the ECC reviewed a summary of Ministry of Commerce’s thoughts on the matter.
The revised cigarette cessation rates for 2023–24 were also discussed in the ECC’s review of a summary from the Ministry of National Food Security and Research. New cess rates for 2023-24 were approved by the ECC.
The ECC gave its stamp of approval to a hike in the cessation fees for all tobacco products.
By the same percentage rise, the cess on dark air-cured tobacco rose to Rs5.70 per kilogramme, on patta to Rs4.38 per kilogramme, on burley to Rs9.7 per kilogramme, and on sun-cured Virginia to Rs6 per kilogramme. The Food Ministry estimated that an increase in salary would cost the government an extra Rs113 million per year, thus they proposed raising the cess rates by a total of Rs115 million.
The ECC postponed a description of the Petroleum Division’s recommended solution to the problem of the Sui mining lease’s expiration.
The executive summary was put on hold with the instruction that the government of Balochistan be involved.
The Sui mining lease that had been in effect since 2015 finally ran out. No further extensions were included in the rules. In 2016, the Petroleum Division and the Balochistani government signed a memorandum of agreement to chart a course forward. After that, the Balochistani administration flat-out rejected the deal.
A committee appointed by Prime Minister Shehbaz Sharif in June was tasked with finding a solution to the conflict. Payments totaling Rs60 billion were suggested by the committee to cover the lease extension bonus, production costs, and social welfare.
Out of the total proposed amount of Rs60 billion, the committee suggested that Rs24 billion be set aside as contingent payments, to be provided only if Pakistan Petroleum Limited (PPL) is able to collect more money from the Sui petrol businesses on a proportional basis, and if petrol prices are raised for consumers.
The committee has suggested that, out of a total commitment of Rs54 billion, the PPL pay Rs12 billion in lease extension incentive. Up until June 2025, the remaining balance would be paid in equal quarterly installments of Rs6 billion.
Before the first installment is paid, the Petroleum Division will execute a Sui Field Petroleum Concession Agreement with the PPL and issue a development and production lease for a period of ten years, from 2015 to 2025.
PPL would pay Rs12 billion to the Petroleum Division for Balochistan’s approval of the proposed concession agreement and development and production leasing plan.
