Thursday Jun 16 2022

IMF says it 'did not ask Pakistan to renegotiate CPEC IPP contracts'

The International Monetary Fund (IMF) headquarters in Washington D.C. — Reuters/File
The International Monetary Fund (IMF) headquarters in Washington D.C. — Reuters/File

The International Monetary Fund (IMF) has rejected reports that it has asked Pakistan to renegotiate deals inked with independent power producers (IPPs) for the China-Pakistan Economic Corridor (CPEC).

A statement was released on Wednesday by Esther Perez Ruiz, IMF’s Resident Representative for Pakistan.

"The IMF did not ask Pakistan to renegotiate CEPC (sic) IPP contracts. These claims are simply untrue," it read.

The statement added that the global lender "supports the government’s multipronged strategy to restore energy sector viability which shares the burden of restoring viability across all stakeholders — the government, producers, and consumers".

IMF's statement follows a report by The Express Tribune that the lender has asked the government to renegotiate CPEC energy deals ahead of payments to Chinese power plants amounting to around Rs300 billion.

Quoting "highly placed sources", the report stated that the IMF "suspected that the Chinese IPPs might have been overcharging Pakistan and there was a need to reopen these deals".

It said that the IMF has "asked the government to treat the Chinese CPEC power plants at par with the power plants established under the 1994 and 2002 power policies", which were set up under the CPEC framework agreement.

The report quoted Perez as emphasising the need for "equitable treatment of all power sector stakeholders due to the limited fiscal space".

“An important principle underpinning these (power sector) reforms is that all stakeholders contribute in an equitable manner to reduce the circular debt, between the government, IPPs and consumers, while protecting the most vulnerable consumers,” it quoted Perez as saying.

The report further quoted finance ministry sources as saying that the global lender had also "objected to giving Rs50 billion to the Chinese IPPs in February this year without first renegotiating the agreements".

PM Shehbaz had on May 30 directed the authorities to immediately release Rs50 billion to Chinese IPPs as the first instalment out of outstanding dues of Rs340 billion.

"Due to the IMF’s objections, the government did not directly make payment of Rs50 billion to the Chinese IPPs last week [...] Instead, the government released Rs50 billion for the Power Division under the general subsidy claims for July. In return, the Power Division made the payment to the Chinese IPPs and some others to address their 'liquidity crunch'," the report said, quoting sources.

The report added that "after knowing about the indirect payment to the Chinese IPPs, the IMF asked Pakistan to provide the list of power plants that received the Rs50 billion injection".