China is providing a concessionary loan for K2 and K3 nuclear power plants having combined generation capacity of 2,117 megawatts. PHOTO: FILE
China has committed $6.5 billion to two nuclear power plants being constructed in Karachi and efforts are under way to further deepen civil-nuclear cooperation, said Prime Minister Nawaz Sharif whose government is struggling to cope with acute power shortages.
He was addressing on Wednesday a special cabinet meeting on the state of the economy, which, unlike the past, was not held behind closed doors but in the presence of media.
Sharif said China was providing a concessionary loan for K2 and K3 nuclear power plants having combined generation capacity of 2,117 megawatts. The repayment period will be 10 to 20 years. Talks with China for more loans for power projects are also under way.
The premier said the government was executing a multi-pronged strategy to end power outages, but he did not give any timeframe.
Elaborating, Finance Minister Ishaq Dar pointed out that paperwork had been started for 22,000MW projects including Dasu power project and Diamer Basha Dam. He expected addition of 8,000MW to the national grid in the next five years.
Circular railway
The prime minister expressed the desire to complete the Karachi Circular Railway (KCR) project as early as possible. He also took up the issue of KCR financing with the Japanese premier during his last visit to New York.
Sharif said the Japan International Cooperation Agency would provide $2 billion for the project, but Tokyo would first see whether Pakistan was committed to the $6.7 billion IMF loan programme.
Pakistan has already successfully completed the first review of the IMF programme. Dar stressed that all conditions set for the first half of the current fiscal year had already been met and Pakistan would soon send a letter to the IMF, asking it to set dates for a second review.
As part of the condition, the government on Wednesday amended the Pakistan Penal Code and the Code of Criminal Procedure Act to punish the people involved in electricity theft. It also increased rates for the Gas Development Surcharge to collect an additional Rs104 billion.
Economic stability to take time
Meanwhile, the finance minister said it will take time to put the economy back on track.
“There is no magic wand to restore economic stability and the recovery will be painful and take some time,” he said in his opening remarks.
The government did achieve a breakthrough, as economic growth in the first quarter (July-September) of 2013-14 remained at 5.1%, he said, adding this could be possible only after clearance of circular debt and increasing gas supplies to the industries.
Foreign reserves
Dar vowed to increase the foreign currency reserves up to $16 billion within a year by adding $10 billion to the current figure. The reserves will be replenished with the help of a $1 billion loan from the World Bank, $400 million from the Asian Development Bank and $730 million from the Islamic Development Bank.
He said the government was attempting to tap unconventional sources of foreign currency including launch of euro bonds worth $1 billion and remittances-backed bonds also worth $1 billion.
Justifying the approach to the IMF, Dar said had Pakistan not gone for the loan programme, it could have faced serious payment problems in the first half of 2014. In the last six months, the reserves had depleted as inflows were not enough to meet international debt obligations, he pointed out.
Dar expressed the hope that $800 million would soon be recovered from Etisalat as part of remaining privatisation proceeds. Pakistan will also get $1.54 billion from the United States on account of Coalition Support Fund.
Published in The Express Tribune, January 2nd, 2014.
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COMMENTS (33)
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@Lala Gee: I am sure China will waive/write off the 6.5 billion dollars as we proceed further on our relationship with China.
Yes, I am sure China will also provide nuclear fuel for free. Who knows, they may even pay you for using their electricity.
@unbelievable: It is not even evident that China has approved such a loan - you find no mention of such a loan in Chinese newspapers. The only sources being quoted (even in the Reuters news that referred to this loan on Dec 24) are Pakistani people who refuse to identify themselves. This is similar to the government statement that World Bank had approved a loan for Diamer Basha when the World Bank's own website did not have it as an approved loan an active loan.
If it's so "cheap" then why don't you know the interest rate? Also - the length of the loan is only a small fraction of the life of the facility - why's that such a great deal? Typical Pakistan - you only have one country offering to finance this deal and have concluded it's a great deal even though you have no factual information to make such a determination.
Hmmm... Let me get this straight, is the Finance Minister of Pakistan really thinking he can call the Liabilities on the Balance sheet as Equity and get away with it? You do know what a 'loan' is right? It carries with it 'interest' and unless these is real wealth being created, either in the form or services or goods, which Pakistan has not much of, it will need to take more loans to service just the interest on these old loans and so on, so can you repeat after me, bank-rupt-tcy?
When China gives Pakistan a loan it is projected as a grant and ++++++++++++++++++++++++++++++++++++++++ when US gives a grant it is projected as a Loan:)!
"Pakistan will also get $1.54 billion from the United States on account of Coalition Support Fund." ++++++++++++++++++++++++++++++++++++++++++++++++ Yeah?
"He expected addition of 8,000MW to the national grid in the next five years." ++++++++++++++++++++++++++++++++++++++++++++++++++++ He means all of it will be added during the 12th month of the Fifth Year.
"Japan expected to lend $2b for Karachi Circular Railway" ++++++++++++++++++++++++++++++++++ Pls call it the Round Railway. The word Circular gives me and also Mr DAR the creeps.
China has its own economic benefits attached to the investment; besides this Pakistan and china has common interests of trade and overcoming energy needs. Pakistan has to be more sensible with the conditions attached to the investment and strategic partnership in this region.
So.. China gives loan to Pakistan which Pakistan then pays back to China plus some more to build nuclear reactors in Pakistan using Chinese workmen & labor. And then Pakistan has to repay the loan as well. Clever Chinese!!
As Pakistan is not a signatory to the Nuclear Non-Proliferation Treaty, it is excluded from the global trade in nuclear materials and technology and can rely only on China for help. The 2,200-megawatt plant is to be built with Chinese technical assistance on the Arabian Sea coast at Paradise Point beach, 40 kilometers west of Karachi. The government sees nuclear energy as a relatively low-cost solution to the problem of load-shedding that has blighted life in the country. This is one of the first steps of our goal of racing towards a load-shedding-free Pakistan. We are grateful to the Chinese government for extending help and support to Pakistan in this hour of need.
@Arjun: Guy I don't think that's much of a problem. Pakistan has a strong nuclear setup. Which hasn't had any accidents or anything since it started. Now please troll elsewhere....
Long time back the western people used to test their products in poor countries.A lot pf Pharmaceutical Companies used to test their drug's. Nuclear energies is very good, but should be handled with a lot of care. Pakistan should acctually do an audit to check the record and safety implementaion of these. Should not believe blindly.
Another good news for Pakistanis under the capable leadership of PMLN. All the crisis are being addressed one after another end and the country is on the right track towards economic growth & development.
China is the only source remain for Pakistan for it dire needs in every section of development. Unfortunately our vested interest people make US that they are one who are in front of Pakistan's development.
There is no Chinese newspaper who has reported this news.
Pak-china nuclear deal is a ray of light for the energy starving nation like Pakistan. The growing energy demand and power –cuts have affected the overall economy of Pakistan. Most of the small industries have left the states causing unemployment at massive scale. The Karachi nuclear power plant will be helpful to curb energy crisis.
@Sabih Shad: if you can not identify the currency symbol ($) please do not write comments.
Newly elected government is serious to minimize the power- cuts. That's why a comprehensive power project has started in karachi. Nuclear energy provides a clean and inexpensive alternative to power generation. With Chinese collaboration, Pakistan has begun the construction of two 1100 MWE plants at the Karachi Coastal Power Project. These plants will be operational soon.
There is lots of hue and cry about prospective nuclear power plants in Karachi. Pakistan possess a comprehensive structural institutions which are instrumental in providing nuclear safety and security. Pakistan is in dire need of energy and it is bending on carving every measure to get rid of this. Chinese cooperation is well acknowledged always. The cheaper loan for nuclear power plants gives a boost to Pakistan economy.
Nuclear cooperation is a much renounced phenomenon among nations to meet the growing energy needs. States are trying to end dependence on any one source in order to avoid any energy crisis like the oil embargoes of 1970s. Pakistan tested nuclear weapons in order to deter against any threats. But now Pakistan is on the way to nuclear energy primarily with the cooperation of China. Economy runs with energy and Pakistan economy suffers a lot because of energy set back. Now hopes are high that nuclear voyage of Pakistan would strengthen its economy.
The Chinese support to Pakistan is always very appreciable and unmatchable. This is really a big landmark in the history of Pak-China, the way China facilities Pakistan to end this energy mess up. This is one of the initial initiatives which newly elected Government of Pakistan opted. The energy crisis in Pakistan has become a dilemma from couple of years which made masses from all walks of life to suffer gravely. China unfolds every dynamic to support Pakistan and now the cheaper loan for nuclear power plants.
Co-operation between Pakistan and China in power sector is appealing. Both states follow the IAEA guideline to ensure safety and security. Chinese assistance in power generation is really appreciable. The power project will enable Pakistan to meet the growing energy demands and power-cuts.
The 8,800-megawatt goal comes as Pakistan faces a severe power crisis. The BBC, citing Pakistani government sources, says Pakistan currently faces an energy shortfall of 3,668 megawatts. Pakistan has for several years sought a deal from the United States to provide nuclear technology for civilian energy production. The United States concluded such a deal with Pakistan's arch-rival, India,
Civil nuclear cooperation between China and Pakistan is a positive step for Pakistan towards loadshedding free Pakistan. This civil nuclear cooperation will definately open up news ways of opportunities and will make both countries to help each other in reforming economy.
Pakistan’s long-term nuclear energy programme called for the setting up of 24 power reactors by the turn of the century and in 1973, the International Atomic Energy Agency (IAEA) endorsed these projections for atomic energy to generate electricity.
@objective observer: Given you care about the 'south east', im sure youre one of the numerous indian trolls on ET so please go away since we dont care what you think. (im not a physicist but i am an avid reader of nuclear tech so here is what i can say beyond what the article has said) As far as objective consideration, it has not been reported what reactor technology will be used for this. given that they are talking about 1000 mw reactors, i suspect we are using some form of gen 3 reactors. China has been developing, with the help of american firms like ge and westinghouse, its nuclear reactors and pursuing indigenous reactors. china is building almost all of these reactors at home so the 'using pakistan as a guinea pig' argument does not hold much. what is true is that their reactors do not have a track record because they are all new technology. some of these will be in use in china very soon (next 2-4 years) but still we wont have much of a track record. why dont we use old technology, you ask? well the new reactors allow much more power production and are technically safer than the old gen 2 reactors. the issue is that all new technology will face this problem. some eu members will be employing untested reactors soon as well (different tech than the ones china is working on). this is what progress is about, taking risks. also, given that we dont have any other country willing to help us and we dont have the infrastructure and knowledge to completely design, build and implement reactors anytime soon, taking china's help makes sense. pakistan has to make sure their technicians understand the technology and are able to run is safely. given pakistan has not had any problems until now seems to suggest they are able and capable.
the need for more immediate options to increase electricity generation, Pakistan remains committed to nuclear power.
Pakistan's ability to meet its energy requirements indigenously is constrained by the relatively poor quality of its coal, the feast or famine nature of hydroelectric power in a monsoon climate, and the political and security challenges of tapping effectively the natural gas reserves in its Baluchistan province. Pakistan will have to seek energy security through a mixture of external and internal sources. As one element of a long-term plan for energy diversity, nuclear power makes sense for Pakistan, as it does for many states.
They want to use Pakistan as a testing ground and launching point for their own ability to build Nuclear plants. A melt down is nothing to play with. No matter how far into Baluchistan you decide to build this accident waiting to happen. Those radioactive winds travel south east.
It's clear that the current government is serious about getting Pakistan back on track- what a change from the wasted decade under Musharraf and 5 lacklustre years under Zardari! I supported PTI but I can see that the majority of Pakistan's people voted correctly.
I am sure China will waive/write off the 6.5 billion dollars as we proceed further on our relationship with China. Its also good from China point of view, since its making use of its reserves in both economically and political sense.
Is this a dollar loan or a yuan loan??