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HomeChinaChina-Pakistan Dispute Over CPEC At 'breaking Point'; Beijing Reluctant To Pump funds

China-Pakistan Dispute Over CPEC At ‘breaking Point’; Beijing Reluctant To Pump funds


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With the fate of the multi-billion dollar China-Pakistan Economic Corridor (CPEC) hanging in the air, the latest reports are suggesting that Beijing is reluctant to pump new funds under the arrangement until problems faced by Chinese investors are resolved. As per reports, the issue of overdue payments owed to Chinese independent power producers (IPPs) is near a breaking point. The project has been halted over differences in cost estimations and contractual disputes

Earlier in 2021, Pakistan pledged to pay USD 1.4 billion due to Chinese power plants against accumulated owed dues of USD 2.3 billion during a meeting of the 10th Joint Cooperation Committee of the CPEC. Earlier, the CPEC Authority had urged the Central Power Purchasing Agency-Guaranteed (CPPA-G) to pay overdue receivables of IPPs established under CPEC, warning that the plants may go into default due to hiking prices of coal in the international market. With pending claims, Sinosure, could not support new projects in Pakistan anymore, Business Recorder reported the body as saying.

Earlier in July 2021, 13 people, including 9 Chinese engineers, alongside over two dozen other people, sustained injuries when a bus carrying the team fell into a ravine upon being hit by an explosive-laden car. In the aftermath, Beijing shut down all operations in the region, demanding a USD 38 million compensation from cash-strapped Pakistan for the victims of the Dasu Hydropower Project. 

Succumbing to pressure, on January 22 this year, the Imran Khan-led nation approved a USD 11.6 million compensation package for the victims, six times the amount that China would have paid provided the blast had taken place on its territory, Hongkong Post reported.

China’s successful arm-twisting is a reflection of the debts and favours both monetary and otherwise that it has lent to Pakistan over the years. In 2020-21, Pakistan had to pay over Rs 26 billion in interest cost to China to repay maturing debt. Moreover, it is facing scores of “hidden debts” totalling $385 billion due to China’s Belt and Road Initiative (BRI) project. Khan had previously requested Beijing to forgive debt liabilities owed to China-funded energy projects established under the project. 

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