Belt and Road Initiative: Pakistan Seeks China Debt Relief


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plans to ask for relief payments for energy projects that Beijing has funded for the past eight years, the latest developing nation struggling to repay debts under President Xi Jinping

In informal conversations, and have discussed easing the terms of debt repayment to a dozen power plants, according to a person with knowledge of the case, who said Islamabad has not yet made a formal request. The parties have explored Beijing’s willingness to stagger its debt payments, rather than lowering returns on equity, the person said, asking for anonymity because the plan is private.


A massive construction of China-funded power plants in Pakistan, originally intended to solve the electricity shortage, has resulted in a surplus that Islamabad cannot afford. Infrastructure projects financed by China’s initiative in other developing countries, such as Sri Lanka and Malaysia, face problems ranging from heavy indebtedness to corruption. A spokesman for China’s Foreign Ministry said they are not aware of Pakistan’s plan to seek debt relief.

“Energy projects have taken care of it with a large amount of stable and low-priced electricity, effectively lowering the overall electricity price in Pakistan, ”the spokesman said in a written response. “Energy cooperation between China and Pakistan has been smooth and has delivered real economic and social benefits.” Pakistan’s power division did not respond to a request for comment.

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has previously denied US criticism that the initiative is leading to debt traps, but acknowledges that countries have had problems repaying loans as a result of the pandemic-induced global recession. Last year, Beijing canceled interest-free loans to 15 African countries that were due to expire at the end of 2020, and it has delayed other payments.

The Belt and Road program had found new life in Pakistan last year with the signing of projects worth $ 11 billion, most of which went towards the renewal of the national railway system.

While Chinese funding has helped Pakistan diversify fuel supplies, it has also led to a surplus of electricity, which is problematic for the Islamabad government as it is the sole buyer and pays producers even when they are not generating. To address the problem, the government has negotiated with power plants, which produce about half of their electricity, at lower rates.

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