Tag Archives: Pakistan’s economy

Is Pakistan Fast Toward Debt Traps With a Series of Hydro Power Projects with China? | Instant News


Pakistan has recently re-entered into several hydropower project agreements with Chinese companies.

Differences between Pakistan and China have erupted earlier in the Bhasha Diamer Dam (DBD) and Kohala. Now they have been renegotiated. Because of the lack of transparency in the agreement, it is not entirely known what prompted the Pakistani leadership to re-enter into an agreement with the same Chinese company; although it has been maintained that the new agreement is subject to different terms and conditions.

On May 13, 2020, Pakistan signed an agreement worth 442 billion Pakistani Rupees (US $ 2.64 billion) with Chinese government-owned company China Power to build a DBD as high as 272 meters. Total DHF financial expenditure is PKR 1,406.5 billion (USD 8.3 billion). The project is located on the Indus river in Gilgit-Baltistan (GB) – which according to India is an illegal occupied territory – and Khyber Pakhtunkhwa. It will likely be completed in 2028.

Previously, it was part of the China Pakistan Economic Corridor project (CPEC) but conditions were difficult, especially regarding transfer of ownership, is not acceptable and is not “Can be done” for Pakistan. After that, the Pakistani government tried to raise money for DHF along with the Mohmand dam through crowdfunding. However, Pakistan later re-entered into an agreement with Chinese companies.

Under the new terms of the agreement, China Power will hold a 70% stake while the remaining 30% will be in the Frontier Works Organization – a commercial arm of the Armed Forces Pakistani troops. DHF construction is expected to create around 16,500 jobs. After operation, it will irrigate about 1.23 million hectares farmland and produce 18.1 billion electricity units every year.

The second project developed by China in Pakistan is in Kohala. It was registered under Pakistan’s Pakistan Economic Corridor since August 2014. The Kohala project is on the Jhelum river on the side of Pakistan-run Kashmir which according to India has been an illegal occupation since 1947-48. The 1,124-Megawatt project will be developed by Kohala Hydropower Company Private Limited. Disputes about the project occurred in 2019 between Pakistan and China, which they tried to resolve but Chinese companies refused to accept the dispute resolution plan approved by the Pakistani government.

One of Pakistan’s main problems with the Chinese developer of the Kohala project is the flow of water and release water to the environment. This was completed after the Economic Coordinating Committee approved an additional release in Jhelum under the Kohala dam. Other problems related to foreign exchange. For this reason, work constraints are created from the Kohala project.

On June 25, 2020, a “tripartite” agreement to implement the Kohala project was signed between the China Three Gorges Corporation, the government of Kashmir (PoK) which was occupied by Pakistan and the Private Workers and Infrastructure Board. This project is likely to cost 2.4 billion US dollars. International Finance Corporation and Silk Road Fund is also a sponsor of this project.

The third hydropower project was agreed between Pakistan and China in July 2020 and is in Azad Pattan. It is located on the Jhelum River near the village of Muslimabad in the Sudhnoti district, in Kashmir (PoK) which is occupied by Pakistan. This will be done by Power Universal Company Limited which is owned and controlled by the China Gezhouba group.

Indus at the proposed Diamer-Basha dam site. Photo: Water and Power Development Authority, Pakistan

Gezhouba has entered into a special-purpose joint venture with Pakistan’s renewable energy developer, Laraib group. Their joint venture is referred to as Azad Pattan Power Private Ltd. Corporation, which will develop projects on the ‘build, own, operate, transfer’ (BOOT) model and transfer them to the Pakistani government after 30 years. It is expected to be completed in 2026. Its capacity is around 700.7 MW and the total investment is around USD 1.5 billion.

For the Pakistani government, both the Kohala and Azad Pattan projects are likely to generate around USD 4 billion in investment, generate around 1800 MW of hydro power and create 8,000 jobs.

However, projects such as DHF faced opposition from people in Sindh and Gilgit Baltistan. A number of people in Sindh have questioned you “worthiness, tenacity and dam profitability“In Gilgit Baltistan, it is believed that most of the infrastructure benefits have been reaped by Bhasha at Khyber Pakhtunkhwa, while water is flowing through Diamer. India also objected to DHF stating that it would be built in illegally occupied territories where Pakistan did not have rights for any construction.

One of the main reasons Pakistan made the agreement was to use available water efficiently, because the country is experiencing water shortages and its annual water supply is now less than 1000 cubic. meters per person. Through the dam, he tried to manage his water resources, especially for agricultural purposes which are the basis of the country’s economy.

Second, Pakistan faces a shortage of electricity. In 2019, Pakistan’s transmission and distribution capacity will stop at around 22,000 MW while the maximum demand from residential and industrial areas is around 25,000 MW. This implies a deficit of 3000 MW. Hydro power plants will increase the total electricity produced and will help reduce the demand and supply deficit.

When formalizing the construction of DHF, Pakistani Prime Minister Imran Khan vowed to build more dams which, he said, would reduce pressure on foreign exchange and allow Pakistan to produce fuel yourself. Khan also said that hydroelectric power has a double benefit because the country “does not need to import fuel and it will not affect our climate is negative” Third, as a debt-ridden country, Pakistan needs investment and assistance to stimulate its economy and create jobs. Previous allies, the US was unlikely to help him and assistance from West Asian countries had other limitations. Because of this, Pakistan has switched to China’s orbit and is now very dependent on it.

However, in the long run, such investment in the hydro sector will increase Pakistan’s debt. According to Pakistan’s 2019-2020 Economic Survey, Pakistan’s total public debt increased by 7.6% this fiscal year. The total public debt recorded at the end of March 2020 is 35, 207 billion (USD 21.03 billion) Pakistani Rupees. Different from public debt is the money Pakistan must pay with loans in the form of investment.

In 2017, China agreed to invest USD 50 billion in five Indus Cascade projects: Diamer-Bhasha; Thakot; Patan; Bunji; and Dasu. According to Hasan Abbas, the time needed for the five projects is likely to increase costs to around $ 98 billion which must be borrowed by Pakistan pay interest rates. Hasan, added that flowers tend to accumulate at almost levels USD 5 billion per year. This means, as Hasan predicted, that Pakistani taxpayers will pay around USD 200 billion after 20 years. DBD was issued among five projects, but the two countries have renegotiated the agreement. In addition, increasing hydro debt will give China an edge in Pakistan’s affairs.

Amit Ranjan is a Research Fellow at the Institute of South Asian Studies, National University of Singapore. Display is private.

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Pakistani PM Tim Imran Khan: Counselor with dual citizenship, multi-million dollar assets, South Asia News | Instant News


PM Imran Khan has launched austerity efforts to resolve Pakistan’s financial problems in 2018.

He promised that his austerity measures would make Pakistan a more financially equal society. It has been two years and commoners in Pakistan are still short of money and all promises of equality have been broken with the myth of austerity being destroyed.

Now, Islamabad has decided to act a bit transparently by publishing the financial details and assets of several special assistants to the Pakistani prime minister.

The announcement was made by Shibli Faraz, Pakistan’s I&B minister through a tweet.

According to the breakdown, at least six Pakistani PM advisers have two citizenships and most of the others have millions of dollars in movable and immovable assets abroad starting with Nadeem Babar, minister of state and PM’s special assistant on petroleum.

He has assets worth 2.1 billion Pakistani rupees. He has stakes in more than two dozen companies based in Pakistan. Babur also happened to be a dual nationality with an American passport.

Then there is Tania Aidrus, Imran Khan’s special assistant in digital Pakistan. He owns four immovable properties outside Pakistan with two in the United States and two each in Britain and Singapore. Aidrus is also a Canadian citizen and has a permanent residence in Singapore.

Next on the list is Zulfi Bukhari, special assistant for Imran Khan outside Pakistan. He owns property in Britain worth 5.2 million euros, gold worth 500,000 euros, four luxury vehicles and a British passport.

Shahzad Syed Qasim, special assistant to the Pakistani PM power division, happens to have US citizenship. Shahbaz Gill, Pakistani PM’s special assistant for political communication also has permanent residence in the United States.

Now, retired Lieutenant General Asim Saleem Bajwa who is Imran Khan’s special assistant currently in the field of information & broadcasting is proud to declare himself a billionaire. Moreover, the Pakistani army is known for its loot and looting. Billionaire Lieutenant General is being controlled on social media not for this but for something even stranger.

Asim Saleem Bajwa falsified the price of Toyota’s land cruisers in his declaration. The special assistant mentioned that he got a car model in 2016 with only 3 million Pakistani rupees while another special assistant, Sayed Bukhari said that he got the 2012 model from the same car with 200 million Pakistani rupees.

Asim Saleem Bajwa has underestimated the price of his car of 197 million. He was confronted but he gave no answer, so one can only imagine the lies hidden by his colleagues.

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The market reopened in Pakistan even though there were many cases of Covid | Instant News




ANI |
Updated:
June 2, 2020 13:28 IST

Punjab [Pakistan]June 2 (ANI): Bend under the pressure of the business community and to “keep the economy going,” the Punjab government has permitted the opening of all markets, markets, shopping centers and other businesses five days a week with longer working hours despite consistently increasing infections coronavirus across the country, which stands at 76,398 on Tuesday.
According to the province separated from the total cases cited by Fajar, 29,647 cases were reported in Sindh, 27,850 in Punjab, 10,027 in Khyber Pakhtunkhwa, 4,514 in Balochistan, 2,893 in Islamabad, 738 in Gilgit-Baltistan, and 271 in Pakistan occupying Kashmir.
The country also recorded 1,621 deaths, but it no longer hopes to impose lock because the government says the poor have been largely affected by COVID-19 lockdowns.
“Unfortunately [previous] lockdown has hit the poor. We can no longer afford that, “Prime Minister Imran Khan told a news conference in the capital Islamabad after meeting the National Coordinating Committee – a body that monitors the coronavirus situation in the country.
“Therefore, except for a few sectors, all other sectors will remain open,” Khan said, without mentioning the sectors that would remain closed. “We must save our people from coronavirus and starvation together.”
The developments came days after health experts warned of a surge in the number of COVID-19 cases across the country following a two-month national lockdown at the end of May.
“Coronavirus will not go anywhere, at least this year. That means we have to live by following safety guidelines,” Khan said further.
Tax collection in Pakistan, the prime minister said, has been reduced by 30 percent, along with a reduction in foreign and local investment due to lockouts.
However, thanks to Islamabad for rejecting the Punjab proposal to reopen around 4,500 registered restaurants, in addition to those not listed, including ‘dhabas’ in Lahore alone.
Media reports further stated that the district court and court in Peshawar resumed operations this week after a break of more than two months.
It has been seen that Pakistan is the coldest in the world affected by the corona virus. A PTI minister called the coronavirus a divine punishment, the chief minister of Punjab promised the ulama mosques would not be closed, while residents looked towards their government for direction. Unfortunately, the Imran Khan government has no plans and there are no directives to deal with the coronavirus pandemic. (ANI)

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When Pakistan’s Energy Crisis Worsens, Does Chinese Investment Fail in Islamabad? | Instant News


Successive official reports on Pakistan’s electricity sector show that the country suffers from a lack of power generation, loss of transmission, lack of planning, and inappropriate policies that lead to an increasing energy crisis. This power crisis in Pakistan is a direct result of massive institutional and governance failures in the form of reckless energy policies over the past three decades.

This raises the answer to the question: what is the impact of investment from the China-Pakistan Economic Corridor (CPEC), with much-commended electricity projects, on the energy crisis?

Circular debt, higher transmission losses and inefficiency of the electricity companies befall Pakistan’s electricity sector, according to the report leaked the government’s mandate report from Pakistan’s National Power Regulatory Authority (NEPRA).

In December 2019, NEPRA Pakistan set a tariff increase of Rs 2.44 per unit due to an adjustment in fuel costs. Nearly a month later in January 2020, they decided to increase Rs 1.76 per unit. In March 2020, the price of electricity per unit increased by Rs 1.61, making the electricity tariff to be Rs 24.47 per unit. These are just a few important things. NEPRA has revised electricity tariffs 17 times since last year to quote monthly fuel and quarterly adjustments. In large part, tariffs are raised because of billions of rupees of capacity payments made to independent electricity producers (IPPs).

Pakistan’s ‘circular debt’ now exceeds two trillion homeworks. This pile not only endangers the survival of the IPP, but also the solvency of local banks – which will be paralyzed if there is a default by the electricity sector.

And if that isn’t enough, a report of an investigation into alleged breach of contract by an independent power producer that has cost more than billions of Pakistani dollars, reveals that IPP has generated an annual profit of 50% to 70%, compared to the 15% limit set by NEPRA. Most IPPs have a 2-4 year payback period, profits are as high as 18.26 times investment and dividends are 22 times investment and based on the 1994 Power Policy, 16 of 17 IPPs invest a combined capital of PR 51.80 billion and generate profits exceeding PR 415 billion. The government’s failure to hold circular debt has cost the country more than 4,082 billion PR in the last 13 years, with an annual loss of PR703 billion.

This revelation was made by ‘Power Sector Audit Committee, Debt Securities and Future Roadmap’, that formed last August in his report, submitted in March 2020 about the state of the electricity sector in Pakistan.

Beijing’s hand

The report also accused financial violations of nearly $ 625 million in the independent power generation sector, with at least a third of them linked to Chinese projects under the umbrella of the China-Pakistan Economic Corridor (CPEC).

The power plant under CPEC approved by NEPRA has convinced the project at energy and infrastructure worth $ 62 billion, with investments in energy projects of $ 35 billion and expected to bridge capacity shortages. Example, the report revealed that in March 2015, Huaneng Shandong Ruyi (Pak) Energy Ltd. (HSR) for a 2X660 MW coal-based thermal plant proposed an assumed cost of $ 145.59 million to Interest During Construction (IDC).

After the ‘commercial operation date’, HSR submitted a revised IDC tariff in January 2019 of $ 197.33 million. HSR has claimed IDC based on markup or London Interbank Offer Rate (LIBOR) long term plus 4.5% during the entire construction period, while the company’s financial statements revealed that the company did not borrow any funds in the first year of construction and obtained short-term loans with interest rates lower during the second year of construction.

Photo file: General view of the port before the inauguration of the China-Pakistan Economic Corridor port in Gwadar, Pakistan November 13, 2016. Photo: Reuters / Caren Firouz / Photo File

Likewise, Port Qasim Electric Power Company (Pvt.) Ltd. (PQE) inflated its management costs, asking for IDC $ 221.9 million at COD in April 2019, compared to IDC from the assumed $ 157.7 million cost in 2015 “Only equity is injected to finance the project and no loans. Therefore, there are no interest costs during this period. “

Initially Prime Minister Imran Khan’s government ordered an investigation into alleged violations of the IPP contract. But earlier this month, The Khan government decided to delay the investigation, quoting preoccupation with COVID-19.

Likewise, the NEPRA power sector regulator in the Industry Report for 2019, has raised the issue of the validity of electricity purchase agreements made with private producers, as well as ‘excess’ payments made to them and the accumulation of massive rounded debts. The NEPRA report observes that the centralized governance model for distribution companies has failed to bring real improvement for more than 15 years. Even when this report raises questions about governance, over-generation, transmission, and distribution costs, this report rightly blames the hardships in the electricity sector for agreements made with independent power producers.

The credentials of Pakistan’s energy policy makers are notoriously half-baked and farsighted. The country’s first formal energy policy and plan were adopted in 1994, 47 years after the country’s independence. In 2002, another power policy was approved, which gave generous agreements including dollar indexation and guaranteed capacity payments, to attract investors, when the country was experiencing an electricity crisis and no one wanted to invest.

The 2009 electricity policy also failed because the ‘rented power plant’ adopted by the government provided expensive electricity. In fact, the Asian Development called the agreement made for these plants to be most expensive in the world at the time. After that, large-scale subsidies to appease the public caused the government to default on its payments to the leased electricity companies which eventually added to the hefty circular debt in the supply chain and resulted in planned and unplanned power cuts of 18 hours.

Over the years, electricity shortages have greatly affected Pakistan’s annual output, exports and employment. The country faces an ongoing and widening gap between demand and the capacity that produces available systems. Electricity shortages and rising prices have become endemic for Pakistan so that it becomes a matter of general elections and is often linked as a cause of election setbacks suffered by the Pakistan People’s Party (PPP) in the 2013 national elections. Until the accumulation of energy sector obligations threatens the country’s fiscal stability to be addressed, economic reforms Pakistan can’t even begin.

Earlier this year, NEPRA had urged PM Imran Khan to announce a national power emergency and take drastic steps to reduce about PRs1,93 trillion circular. This circular debt accumulates through perpetual defaults in payments by several electricity consumers (connected to various distribution companies (DISCO)), which default extends to electricity suppliers / producers (independent power producers – IPP, Water and Electricity Development Authority (WAPDA), power plants nuclear power and power generation companies – GENCOS) and fuel suppliers (PSO and gas companies) for these electricity producers. This also includes theft and operational and technical inefficiencies of the system. The NPRPRA reports that circular debt has increased by approximately PRs 492bn during fiscal year 2018-19 with a monthly average of around Rp 41-42 billion.

The electricity power crisis around cut 2% of Pakistan’s economic growth every year. Consequently, for the successful realization of the CPEC, a major part of the investment was allocated to revitalize Pakistan’s power sector. Because almost 60% of CPEC funds are directed towards the energy sector, these funds must be scrutinized by the Pakistani government. Assumptions are made to facilitate postulates in the energy crisis in Pakistan with investment in Chinese energy infrastructure that results in reduced transmission losses and augmentation of the mix of sustainable power plants.

But how much is this CPEC energy investment worth? Theoretically, foreign direct investment under the CPEC umbrella is a great opportunity for Pakistan. but again most CPEC investment in the electricity sector is directed towards the power generation side and less focus is given to the distribution and demand sides. Even after China-funded energy projects become operational, they will use the majority of the dilapidated infrastructure currently which is vulnerable to annual losses of 25%.

Loss of electricity transmission and distribution is already high in Pakistan. Until Pakistan’s power distribution network is improved, the energy crisis is unlikely to diminish. Under the CPEC energy projects, little attention has been given to improving the electricity supply network. There are no projects approved for the installation of smart grids and smart meters. New electricity projects that are being developed under CPEC will utilize the same distribution and transmission networks as a matter of theft and loss. Even from an environmental point of view, investment in the CPEC energy sector has not reduced Pakistan’s electricity generation dependence on oil or increased dependency on other more sustainable sources.

Pakistan’s power sector’s circular debt is almost inflated PRs 1.9 trillion as debt standing at PRs 990 billion. Pakistan should try to negotiate a reduction in debt mark up from the average LIBOR + 4.5% available to Libor + 2 and look for an extension of the debt payment period in tariffs to 20 years from the existing 10-year payment period. Unless Pakistan re-profiled most of the CPEC debt, the country is in danger of entering into a debt trap and further damaging its international credit.

It remains to be seen whether Pakistan’s closest ally, China, will loosen its payment obligations of more than $ 30 billion in electricity projects of around 12,000 megawatts under the CPEC to minimize Pakistan’s financial and economic difficulties.

Vaishali Basu has worked as a consultant at the Secretariat of the National Security Council (NSCS) for several years. He, at present, is related to the Think Tank Policy Perspective Institution Foundation.

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Pakistan will launch diplomatic steps to reschedule debt amid the corona crisis | Instant News


The decision came to offset the negative impact of a global pandemic on an already struggling economy

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Foreign Minister Shah Mehmood Qureshi. PHOTO: EXPRESS

ISLAMABAD: Pakistan has decided to launch a diplomatic initiative, seeking to reschedule bilateral and multilateral loans to offset the negative impact of the corona virus pandemic on its economy, officials said on Monday after a high-level huddle was held at the Foreign Office in Islamabad.

Foreign Minister Shah Mehmood Qureshi chaired the meeting attended by Prime Minister of Finance Adviser Dr. Abdul Hafiz Shaikh, Minister of Planning, Development and Special Initiative Asad Umar and Foreign Minister Sohail Mahmood. Pakistan’s Permanent Representatives to the United Nations in New York and Geneva also joined the session via video link.

The meeting discussed the negative implications of COVID-19 on the economy. FM Qureshi noted that because of the pandemic, Pakistan’s exports had declined on one side and economic activity in the country had stalled because it was locked on the other side.

The national count of patients with highly infectious diseases has surged past 3,500 with at least 50 deaths.

Imran urges the world to consider writing off loans to help deal with coronavirus

This, according to the foreign minister, made it difficult for developing countries like Pakistan to carry out their business as usual.

“For this reason Prime Minister Imran Khan came up with the idea of ​​rescheduling the loans of developing and poor countries,” Qyresgu was quoted as saying in a FO statement.

He explained the meeting about the steps taken by the State Department to ensure that developed countries and multilateral organizations pay attention to these ideas.

Qureshi spoke with foreign ministers from rich countries over the past few weeks to seek their support for loan restructuring.

COVID-19: Pakistan, World Bank in talks for a $ 200 million loan

It was decided at the meeting that joint efforts would be made to convince powerful countries for this initiative.

To this end, Pakistan’s permanent representation to the United Nations in New York and Geneva has been directed to launch diplomatic efforts while the foreign minister will continue to reach out to his colleagues in the world capital.

The coronavirus outbreak began to have an impact on the Pakistani economy, which struggled even before the pandemic.

The government’s own assessment shows that the country’s economy could suffer losses between Rs2 to Rs2.5 trillion and lose 18.5 million jobs if the lockup lasts for three months.

Independent economists put losses on the economy between Rs890 billion to Rs1,6 trillion.

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