Pakistan’s Prime Minister Shehbaz Sharif. File
| Photo Credit: Reuters

“Pakistan Prime Minister Shehbaz Sharif will embark on a five-day visit to China on June 4 to further strengthen bilateral ties,” the Foreign Office announced on May 31, as the all-weather allies seek to upgrade cooperation under the multi-billion dollar China-Pakistan Economic Corridor (CPEC).

“Sharif will be in China from June 4 to 8 on the invitation of Chinese President Xi Jinping,” Foreign Office spokesperson Mumtaz Zahra Baloch said at her weekly briefing.

China refuses to further expand cooperation with Pak in energy, water, climate under CPEC

The visit aims to increase cooperation under the CPEC project, as the two sides look forward to launching the second phase of the project. The CPEC was launched a decade ago and several projects related to energy and infrastructure had been already completed.

The Prime Minister chaired a meeting in Islamabad on Friday on his upcoming China visit directed to prepare an action plan to encourage Chinese companies to set up industries in Pakistan, assuring that Pakistan will provide all possible facilities to Chinese industrialists and investors.

Radio Pakistan reported that a detailed briefing was given to the Prime Minister on the preparations for his visit to China, during which a delegation of industrialists, investors and entrepreneurs from Pakistan will also accompany him during his visit to Chinese city Shenzhen.

The delegation will meet the Chinese business community and discuss the promotion of business-to-business relations between the two countries.

The Prime Minister directed to formulate a comprehensive plan regarding productive business-to-business meetings between the two countries during his visit to China. He also directed the Pakistani Ambassador to China to provide all possible facilities to the Pakistani business delegation in China.

Meanwhile, The Express Tribune reported that the government approved the construction of another road project under the CPEC at a cost of $2 billion, paving the way for the signing of its framework agreement during Prime Minister Sharif’s visit to Beijing.

The Central Development Working Party (CDWP), the body mandated to recommend mega schemes for higher forum approval, sanctioned the construction of the Thakot-Raikot 241-kilometre section of the Karakoram Highway, according to an announcement by the Ministry of Planning after the meeting.

The CDWP approved the project at a cost of Rs.567.5 billion (Pakistani Rupee) ($2 billion), with the direction that the price tag should be further reduced by rationalising overhead expenses.

The Karakoram Highway was originally built with the help of China about 50 years ago, and due to the difficult terrain, scores of people died during the construction phase.

A fully functional all-weather Karakoram Highway is critical for China-Pakistan economic and commercial relations. This is the third major road infrastructure project both nations aim to build under CPEC, following the Multan-Sukkur motorway and the Havelian-Thakot section of the Karakoram Highway.

The Deputy Chairman of the Planning Commission, Jehanzeb Khan, chaired the CDWP meeting. Mr. Khan’s position in the government may further be strengthened after the budget due to certain administrative changes that Prime Minister Sharif’s government is considering implementing.

Pakistan and China have already agreed to complete the remaining missing link of more than 800 kilometres of the Karakoram Highway during the 10th Joint Cooperation Committee meeting. “The 241-kilometre missing link is planned to be constructed with a Chinese soft loan,” according to Ministry of Planning officials.

Out of the $28 billion investment under CPEC, so far, $6.7 billion has been made in infrastructure projects. Last week, Pakistan requested Beijing to fund nine more projects under CPEC worth $17 billion, including the road missing link.

If China agrees to finance the project, it will be completed on an engineering procurement and construction modality, and the approval of the federal Cabinet will also be required. There were also issues with financing the project from the Public Sector Development Programme (PSDP), as the National Highway Authority’s financing requirements for ongoing projects have already gone up to Rs.1.7 trillion.

The country also needs Rs.250 billion annually if it wishes to complete the Mainline-I project of CPEC in the next eight years.

Representational image only.
| Photo Credit: AFP

Pakistan has decided to seek a rollover of around $12 billion debt from key allies such as China in the 2024-25 fiscal year to meet a whopping $23 billion worth of gap in its external financing as the federal government aims to achieve budget targets before the expected arrival of an IMF team to the cash-strapped country.

According to the Finance Ministry insiders, $5 billion from Saudi Arabia, $3 billion from the UAE and $4 billion from China will be rolled over, adding that the estimate of further new financing from China would also be included in the next financial year’s budget, The Express Tribune newspaper reported.

Pakistan will receive more than $1 billion from the International Monetary Fund (IMF) under the fresh loan programme, whereas new financing from the World Bank and Asian Development Bank has also been included in the estimated budget.

According to the Finance Ministry sources, new loan programme agreements will be made with financial institutions. The federal government aims to achieve budget targets before the anticipated arrival of the IMF review mission in Pakistan.

Negotiations for a new loan programme with the global lender are expected to commence in mid-May ahead of the budget which will be presented in June. The Finance Ministry sources said the Ministries had been instructed to complete the targets before the negotiations on the new loan programme.

They added that the details would be given to the IMF delegation when all the important targets were met. It has also been decided to have the budget strategy paper approved by the federal Cabinet before the IMF review mission arrives in the country.

According to the sources, the Finance Ministry has started preparing the budget to set the targets for debt repayment, defence budget and tax collections. Besides, the development and ongoing budget targets will also be determined, according to the paper.

Pakistan has been suffering the chronic ailment of how to meet external liabilities. Traditionally, it depended on remittances, export proceeds and foreign loans to meet its liabilities. But exports haven’t increased to match the imports and avenues of foreign aid have gradually dried up, putting pressure on the Rupee and essential imports.

Last year, it narrowly avoided default due to a timely short-term loan agreement with the International Monetary Fund which provided $3 billion during nine months. The country is once again looking towards the global lender to provide a fresh loan to keep it moving.

In the trying economic conditions, Pakistan has been heavily supported by the remittances its workers living and working around the globe send. The country received the second-highest remittances of the ongoing 2023-24 fiscal at $2.8 billion in April 2024.

According to the State Bank of Pakistan (SBP), the remittances increased by 3.5% to $23.8 billion cumulatively in the first 10 months of FY24 compared to the same period last year.

Remittance inflows during April 2024 were primarily sourced from Saudi Arabia ($712 million), the United Arab Emirates ($542.3 million), the United Kingdom ($403.2 million) and the United States of America ($329.2 million), according to the bank.

The remittances earlier had peaked near $3 billion in the prior month of March 2024, marking a 23-month high.

Separately, the Dawn newspaper reported that Pakistan is engaging with the Chinese leadership for the revival of more than 1800-megawatt of hydropower projects (HPPs) and investment from fresh Chinese companies in the country’s transmission and distribution network as part of the second phase of the China-Pakistan Economic Corridor (CPEC).

The authorities are trying to convene a meeting of the Joint Cooperation Committee (JCC) of the Cabinet on May 22-23 so that Prime Minister Shehbaz Sharif’s upcoming visit to Beijing early next month will be a success.

A high-level delegation led by Planning Minister Ahsan Iqbal is currently in China to pursue existing investors and financial institutions and tap into more firms in the transmission and distribution network as part of CPEC’s second phase.

In his meeting, Mr. Iqbal sought China’s continued cooperation in the early implementation of the Azad Pattan and Kohala hydropower projects. The two sides agreed to hold the next round of the Joint Working Group meeting on Energy (JEWG) soon.

Police officers examine the site of suicide bombing at a highway in Shangla, district in the Pakistan’s Khyber Pakhtunkhwa province, Tuesday, March 26, 2024.
| Photo Credit: AP

Pakistan’s military on May 7 said a suicide bombing that killed five Chinese engineers and a Pakistani driver in March was planned in neighbouring Afghanistan and that the bomber was an Afghan citizen.

At a news conference, Army spokesman Maj. Gen. Ahmad Sharif said four men behind the March 26 attack in Bisham, a district in Khyber Pakhtunkhwa province, had been been arrested.

Mr. Sharif said the attack that killed the Chinese engineers, who were working on Pakistan’s biggest Dasu Dam, was an attempt to harm friendship between Pakistan and China. Thousands of Chinese are working on projects relating to the China-Pakistan Economic Corridor.

Mr. Sharif also said Pakistani Taliban who have sanctuaries in Afghanistan were behind a surge in attacks inside Pakistan since January in which 62 security forces were killed around the country. He said the Afghan Taliban had failed to honour promises they made to the international community before coming to power, vowing no one would be allowed to use Afghan soil for attacks against any country.

There was no immediate comment from the Afghan Taliban government, which has previously denied such allegations.

The Pakistani Taliban, known as Tehreek-e-Taliban Pakistan or TTP, is a separate group but a close ally of the Afghan Taliban, who seized power in Afghanistan in August 2021 as U.S. and NATO troops were in the final stages of their pullout from the country after 20 years of war.

Mr. Sharif said Pakistan had solid evidence about TTP involvement in violence in the country.

He also vowed that no foreigner living in Pakistan without valid documents would be allowed to stay, and 563,639 Afghans living illegally had gone back to Afghanistan since last year, when Islamabad launched a crackdown on illegal migrants.

He said Pakistan’s military had completed 98% of a fence being constructed along the border with Afghanistan. He said 91% of a fence along the Iranian border had also been completed to check illegal movement, curb smuggling and prevent cross-border militant attacks.

Afghanistan has never recognized the porous border that runs through the heartland of the Pashtun, Afghanistan’s largest ethnic group.

The army spokesman also dismissed media reports about the possibility of any deal or talks with the country’s imprisoned former Prime Minister Imran Khan or his party. Khan is serving multiple prison sentences on charges of corruption, revealing official secrets and marriage law violations.

China has refused to further expand cooperation in the areas of energy, water management, and climate change under the multi-billion dollar China-Pakistan Economic Corridor (CPEC), it emerged on September 25, signalling a strain in the ‘ironclad’ friendship between the two all-weather allies.

Cash-strapped Pakistan also gave up its opposition to setting up a new imported coal-fired power plant in Gwadar in Balochistan province and agreed to a number of Chinese demands to address Beijing’s concerns, The Express Tribune newspaper reported, citing the signed minutes of the 11th Joint Cooperation Committee (JCC) of the CPEC.

The JCC is a strategic decision-making body of the CPEC and its 11th meeting was held virtually on October 27 last year on the insistence of the Pakistan Muslim League-Nawaz (PML-N)-led government that wanted to showcase some progress.

However, the minutes of the meeting were signed almost a year later on July 31 during the visit of Chinese vice premier He Lifeng, highlighting the difference of opinions on both sides that led to such a huge delay in reaching a consensus, the report said.

When contacted, the Ministry of Planning stated that it was a global practice for the minutes of meetings between two countries to be signed by both sides only after due consultation and evolving consensus.

Interestingly, the final draft shared with Beijing by Pakistan and the final minutes signed by both sides were different in many ways, the report said.

China’s disagreement to further expand cooperation in areas of energy, water management, and climate change under the CPEC underscores “the challenges that both the sides are facing in deepening the economic ties”, it said.

The $60 billion CPEC, which connects Gwadar Port in Pakistan’s Balochistan with China’s Xinjiang province, is the flagship project of China’s ambitious multi-billion-dollar Belt and Road Initiative (BRI). The BRI is seen as an attempt by China to further its influence abroad with infrastructure projects funded by Chinese investments all over the world.

The CPEC is a collection of infrastructure and other projects under construction throughout Pakistan since 2013. India has protested to China over the CPEC as it is being laid through Pakistan-occupied Kashmir (PoK).

The details of the final minutes of the 11th JCC showed that China did not agree to a host of measures that Pakistan had proposed in the areas of energy, water management, climate change and tourism in Gilgit-Baltistan, Khyber-Pakhtunkhwa, PoK and the coastal areas.

China excluded cooperation in the areas of cross-border tourism in Gilgit-Baltistan, Khyber-Pakhtunkhwa, PoK and cooperation for the promotion of coastal tourism from the final minutes, the details showed.

China also did not agree to Pakistan’s proposal for the inclusion of Water Resources Management and Climate Change and Urban Infrastructure Development in the CPEC framework. The proposal for setting up a new joint working group on water resources management and climate change was also rejected by China.

China excluded the issue of financial challenges being faced by the power companies from the final minutes.

Beijing also did not agree to a proposal to include a 500kv transmission line from Hub to Gwadar to link the seaport city with the national grid in the CPEC framework.

China did not agree to “carry out joint studies for future development of Thar coal blocks, including development of mega power parks and power evacuation infrastructure, with a view to meet Pakistan’s energy needs from indigenous resources, conversion of coal into other products for domestic demand as well as exports”, the report said.

Similarly, there is no mention of the South-North gas pipeline project in the final minutes. The draft minutes mentioned the examination of a feasibility study and Chinese cooperation for the purpose.

Pakistan had proposed Chinese participation in a strategic underground gas storage project but there is no mention of this mega project in the final minutes.

Islamabad had also proposed the participation of China in the national seismic study for sedimentary areas and sought Chinese equipment. But this idea is also shelved at the bilateral level.

Pakistan proposed joint exploration, development, and marketing of metallic minerals and sought Chinese technology, but the final minutes were silent on this issue too, according to the Express Tribune report.

China also did not agree to Pakistan’s proposal of developing a policy framework for coal gasification to fertiliser projects based on Thar coal.

Meanwhile, Pakistan has given significant concessions to China on the issue of setting up the 300MW Gwadar Power Plant.

Islamabad wanted to either shelve the 300MW project or change its location to Thar to use the local coal. However, China did not agree to it, the report said.

Pakistan also wanted the conversion of the imported fuel-based Gwadar plant to Thar coal to address energy security and liquidity issues to which China did not agree.

Pakistan also committed that it would follow the consensus reached by two sides, and will direct the Pakistani power purchase companies to stop deducting the capacity power rate and return the deducted power rate.

To ensure the normal operations of CPEC power projects, the Pakistani side promised to take necessary measures to ensure timely exchange to US dollars for CPEC power projects to buy necessary fuels, the report said.