ECC okays $3b loan guarantee for N-plant
ISLAMABAD: Pakistan on Tuesday approved the issuance of sovereign guarantees worth $3 billion against a Chinese loan for a nuclear power plant and also signed an operator-favored state aid agreement for the outsourcing of Islamabad International Airport.
The outgoing Cabinet’s Economic Coordination Committee (CCE) made these decisions, but left the decision to import at least one million tonnes of wheat to the caretaker government.
Finance Minister Ishaq Dar, who may have a role in the interim setup, chaired the ECC meeting. After the meeting, the Ministry of Finance stated that the Pakistan Atomic Energy Commission presented a brief on the issuance of government guarantees for the Chashma Nuclear Power Project Unit -5 (C-5).
“The ECC decided to allow the gradual issuance of government guarantee for the Chasma C-5 project under the IMF program.” Under the terms of the agreement, China will provide the loan of 21.3 billion RMB or 3 billion USD for a period of 20 years. China will charge an interest rate of 3 percent, and repayments will begin after eight years.
However, Pakistan is required to issue sovereign guarantees for the repayment of Chinese debt along with the interest. According to the financing agreement, the sovereign guarantee issued by the Government of Pakistan to guarantee PAEC’s payment obligations is a prerequisite for the validation of the C-5 contract by China.
The Civil Aviation Ministry informed the ECC that issues that could hinder the airport transaction include unpaid PIA fees, uncertain macroeconomic conditions, concession fees and charges from the Civil Aviation Authority, fate of employees and existing contractual arrangements at the airport. All of these responsibilities have been transferred to the federal government.
The World Bank’s International Finance Corporation (IFC) has also recommended allowing the new operator to operate a foreign currency account to avoid problems arising from poor conditions in the country’s external sector. The IFC had urged the government to sign the service level agreement between all government entities performing reserve functions.
The Civil Aviation Authority (CAA) so that the authority is not held accountable for non-compliance with agreed performance indicators. The IFC also recommended that the Government should support CAA payment obligations for termination payments in all scenarios through the State Aid Agreement.
Published in EDP BLOGS on Aug 14,2023.
