Amid growing fears of a complete meltdown of the Pakistani economy leading to default, Chinese investors have asked Islamabad to defer repayment of loans taken for setting up energy plants under the China-Pakistan Economic Corridor (CPEC). -Transfer money to bank accounts.
Additionally, Chinese investors have also stressed that Islamabad should pay dividends worth $12 million given to Chinese companies operating in Pakistan.
China's demand has created a state of emergency in relevant circles of the Pakistan government, which are now considering and consulting as to what kind of response should be given.
Sources aware of the developments say that Pakistan has not yet accepted this demand and is cautious about its possible reaction.
“Islamabad is also cautious about possible reactions from the International Monetary Fund (IMF) to any new concessions to Beijing,” the government source said.,
Pakistan Finance Minister Muhammad Aurangzeb has urged special caution while accepting any Chinese demand.
"The Finance Minister has cautioned Cabinet ministers against accepting China's demands for the time being due to sensitivity regarding the upcoming bailout program talks with the IMF," a senior official said.
The government says Islamabad has never defaulted on Chinese energy debt payments, an argument it could use to respond to demand from Chinese investors.
Pakistan is also expected to give its response during the meeting of the Joint Working Group on Energy in Beijing next week.
Sources say another reason for the latest Chinese demand is that Chinese investors are finding it difficult to get new loans due to the financial crisis in Pakistan.“To address banks' concerns, investors are now looking to keep funds in off-shore accounts to reflect their revenue flows,” said the official, requesting anonymity.
Chinese investment in energy projects in Pakistan is estimated at at least $21 billion, while Chinese loans to energy projects amount to about $15 billion.
China has set up energy projects in Pakistan with the understanding of 7 percent loan and 25 percent equity. Now, it has to make annual payments of about $2.4 billion in debt and dividends.
On the other hand, Pakistan's foreign exchange reserves are thin
currently $9 billion
Ability to allow outflow of funds.Most of these reserves were acquired through foreign borrowing and open market purchases amounting to about $5.5 billion.
Islamabad is not ready to meet any demand from China which may have a negative impact on the upcoming visit of the IMF team to Pakistan.
However, ignoring Chinese demand is also something that the current government cannot afford.
Additionally, Chinese investors have also stressed that Islamabad should pay dividends worth $12 million given to Chinese companies operating in Pakistan.
China's demand has created a state of emergency in relevant circles of the Pakistan government, which are now considering and consulting as to what kind of response should be given.
Sources aware of the developments say that Pakistan has not yet accepted this demand and is cautious about its possible reaction.
“Islamabad is also cautious about possible reactions from the International Monetary Fund (IMF) to any new concessions to Beijing,” the government source said.,
Pakistan Finance Minister Muhammad Aurangzeb has urged special caution while accepting any Chinese demand.
"The Finance Minister has cautioned Cabinet ministers against accepting China's demands for the time being due to sensitivity regarding the upcoming bailout program talks with the IMF," a senior official said.
The government says Islamabad has never defaulted on Chinese energy debt payments, an argument it could use to respond to demand from Chinese investors.
Pakistan is also expected to give its response during the meeting of the Joint Working Group on Energy in Beijing next week.
Sources say another reason for the latest Chinese demand is that Chinese investors are finding it difficult to get new loans due to the financial crisis in Pakistan.“To address banks' concerns, investors are now looking to keep funds in off-shore accounts to reflect their revenue flows,” said the official, requesting anonymity.
Chinese investment in energy projects in Pakistan is estimated at at least $21 billion, while Chinese loans to energy projects amount to about $15 billion.
China has set up energy projects in Pakistan with the understanding of 7 percent loan and 25 percent equity. Now, it has to make annual payments of about $2.4 billion in debt and dividends.
On the other hand, Pakistan's foreign exchange reserves are thin
currently $9 billion
Ability to allow outflow of funds.Most of these reserves were acquired through foreign borrowing and open market purchases amounting to about $5.5 billion.
Islamabad is not ready to meet any demand from China which may have a negative impact on the upcoming visit of the IMF team to Pakistan.
However, ignoring Chinese demand is also something that the current government cannot afford.
