Aurangzeb rules out deal on immediate reprofiling of Chinese IPPs $15.4bn debt

ISLAMABAD: Ruling out the possibility of any formal agreement on re-profiling of Chinese IPPs debt of $15.4 billion, Minister for Finance Muhammad Aurangzeb said that both the sides might move for striking a Memorandum of Understanding (MoU) for continuation of talks on outstanding debt during the upcoming visit of Chinese prime minister.

The formal agreement would require more spadework and finalising parameters of the re-profiling of Chinese IPPs debt.

“Pakistan and China may move towards an MoU for continuation of discussion for finalising details of Chinese IPPs debt re-profiling,” Federal Minister for Finance Muhammad Aurangzeb said while talking to reporters after attending the Senate Standing Committee on Finance meeting here at the Parliament House on Wednesday. The minister clarified that the deceased Chinese engineers were not involved in IPPs talks. He said any impression created to this effect is misleading and has no basis.

Pakistan had requested China for re-profiling of IPPs debt of $15.4 billion by extending its maturity timeframe for five years from 2036 to 2041 with the calculation that it would help reduce the electricity tariff by Rs3.75 per unit. However, the cumulative effect of the requested re-profiling of outstanding Chinese IPPs debt would result into escalating the overall amount from $15.4 billion to $16.6 billion but the time period for repayment would be extended. It would be a long and lengthy process as first both the governments would strike a formal agreement and then the individual IPPs and Islamabad would sign an agreement to alter their contractual obligations.

To another query about imposition of Agriculture Income Tax (AIT) by the four provinces, the minister replied that the legislation would be introduced by the provinces till January 1, 2025 but its actual collection would be kick-started from the next fiscal year 2025-26 with effect from July 1, 2025. Earlier, it was understood that the provinces might introduce legislation into their respective provincial assemblies till October 31, 2024 and the collection from AIT would commence from January 1, 2025. However, the minister explicitly stated that the collection on AIT would kick-start from July 1, 2025. When asked about the details of proposed constitutional package and its exact timeframe for tabling in parliament, the minister did not give an answer, stating that he did not know any details about it.

Earlier, during the Senate Standing Committee on Finance meeting held under Chairmanship of Senator Saleem Mandviwalla, the Minister for Finance categorically stated that the Ministry of Finance would not intervene in the regulatory affairs like imposition of penalty on banks by the State Bank of Pakistan (SBP).

He made these observations while reviewing of “The Banking Companies (Amendment) Bill, 2024. On the issue of penalty imposition on banks, the finance minister stated if the SBP imposes penalty on banks, the Finance Ministry can intervene to resolve the issue. However, the finance minister said that the proposed amendment would not be in line with the spirit of the “The Banking Companies (Amendment) Bill, 2024”. The committee unanimously approved, with amendments, the Government Bill titled “The Banking Companies (Amendment) Bill, 2024,” which was referred by the House on August 27, 2024.