"Yes, we have accelerated efforts to get some sort of relaxation from Beijing either in the power purchase mechanism or on the mode of payment of capacity cost," Asia Times quoted the source as saying.
According to the source, a high-level delegation led by Pakistani President Arif Alvi visited Beijing last March to discuss the possibility of a 2.5 per cent cut in the present interest rate on power sector-related loans at Libor plus 4.5 per cent.
"[Alvi] also discussed with his Chinese counterpart a 10-year extension in the debt repayment period. These two rebates, if approved, would save [Pakistan] about USD 600 million annually," said the source.
The Pakistani government has recently reapproached Chinese officials on the issue but no information has leaked out in the public domain on their exchanges, reported Asia Times.
"First, the power purchase agreements made with Beijing provide for a highly overrated power supply, which eats up roughly USD 1.6 billion annually. Another USD 1.8 billion goes into power pilferage and line losses, and yet another USD 9 million is consumed in recovery losses of power dues from consumers," Asia Times quoted Dr Farrukh Saleem, an Islamabad-based political economist, analyst, and columnist, citing official statistics on power sector losses incurred by the state.
Saleem said that the recent COVID-influenced downturn in gross domestic product growth from 5.8 per cent in 2018 to -0.4 per cent in 2020, the first time Pakistan's economy dipped into negative growth in over seven decades, has curtailed electricity demand across the country.
"This rendered thousands of megawatt electricity surplus, on which the government pays capacity charges in line with the agreements," Saleem added.
Experts say that if the current overcapacity problem and debt repayment terms persist, the government's overall power sector liability may balloon beyond 1.5 trillion rupees (USD 9.4 billion) by the end of 2023, reported Asia Times.
Asia Times further reported that official estimates indicate that Pakistan's energy-related debts will rise to 2.8 trillion (USD 17.5 billion) rupees by the end of June under current Belt and Road terms and conditions. The figures show that power sector liabilities surged by 538 billion rupees (USD 3.4 billion) in just one year from July 2019 to June 2020.
Official figures indicate that Pakistan's total debt servicing liability could surpass USD 14 billion by the end of the year, at a time foreign exchange reserves are hovering around USD 13 billion.
That's leading some analysts to the conclusion that China's Belt and Road lending to Pakistan is becoming a "debt trap", as total external debts and liabilities hit USD 115.76 billion at the end of 2020 and more owed in 2021 for what are now seen as unproductive Chinese power sector investments, Asia Times reported.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.