Islamabad: Pakistan, which came under the guise of the Belt and Road Initiative, is now badly trapped. For power projects, Pakistan, which has been borrowing heavily from China in the last 8 years, is no longer able to pay installments. In such a situation, Pak now preparing to seek relief from its alleged ‘evergreen friend’. However, before this many small countries have lost a lot of their money by getting caught in this move of China.
In informal talks, Pakistan and China have discussed easing terms on the repayment of debt on about a dozen power plants, according to a person with knowledge of the matter, who said Pakistan hasn’t made a formal request yet. The parties have canvassed China’s willingness to stagger debt payments, as opposed to lowering equity returns, the person said, requesting anonymity as the plan is private.
An enormous build-out of Chinese-financed power plants in Pakistan, which was originally intended to solve its electricity shortages, has resulted in a surplus that Islamabad isn’t able to afford. Infrastructure projects funded by China’s initiative in other developing nations, such as Sri Lanka and Malaysia, have suffered issues ranging from heavy debt loads to corruption.
China has rejected criticism of the US that the Belt & Road Initiative has turned into a debt trap. However, China admitted that countries were facing difficulty in repaying loans due to the global slowdown caused by the pandemic. Last year, Beijing provided debt relief to 15 African countries by the end of 2020. Pakistan has signed $ 11 billion projects last year under the Belt and Road Program, most of which are to change the situation in the country’s railways.
China’s loan helped Pakistan in energy supply, but it started generating more power than needed. This has become a big problem for the government of Islamabad.