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.
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.
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.