Finance Minister Aurangzeb says China signals to convert three Pakistani power plants to local coal. both sides initiate talks on re-profiling Chinese power sector debt. Govt issued Rs68b income tax refunds this month. Tax net being expanded to lessen burden on existing taxpayers as FBR has identified 4.9m income tax non-filers.
ISLAMABAD - Pakistan and China have initiated negotiations on re-profiling of Chinese power sector debt and conversion of power plants to indigenous coal, and agreed to form working groups in this regard.
While addressing a press conference here on Sunday, Finance Minister Mohammad Aurangzeb said that Pakistan is in talks with Saudi Arabia, the United Arab Emirates, and China in order to meet external financing gap under the IMF programme.
He said that China, Saudi Arabia and United Arab Emirates have always been very important partners on the external financing side, and negotiations are underway with these countries for the rollover of debt. “We are talking for the roll over the existing loan and we are requesting to extend the maturity period.”
On the re-profiling of Chinese power sector debt, he said that it was the beginning.
He said that that he along with Minister for Energy Sardar Awais Ahmad Khan Leghari had visited China and held constructive meetings with the Chinese authorities including the Finance Minister of China and the President Bank of China.
During the recent visit to China, re-profiling of energy sector loans was also discussed, he said adding that the conversion of energy plants into coal was also discussed. The minister said that the Chinese authorities acknowledged and ensured that the issues are registered with the right forum adding that the process has to be followed to take them forward. They were ready to help Pakistan in terms of re-profiling.
He said that two issues were discussed with Chinese officials, one was related to coal conversion and the second was related to re-profiling of the Chinese debt for the power sector.
“We have a positive discussion…in days and weeks to come the working groups will be established and we will take the matter ahead,” he added.
In reply to a question, he said “We have discussed in detail the coal conversion, and re-profiling,” adding that they (Chinese) have told us that they will work with sponsor along with us.”
The plants affected include the 1,320 MW Sahiwal Coal Power Plant, the 1,320 MW Hub Power Plant, and the 1,320 MW Port Qasim Power Plant, all known for producing some of Pakistan’s most expensive electricity.
He said that there are nine CPEC power generation projects, and one transmission project, each one has a different profile and issue. We will have go project by project and work with central bank in China. “Instead of leading it from Islamabad, we will appoint a local (Chinese) advisor,” he added.
“We are very clear, that this time one is immediate issue, in terms of tariff and everything that’s going on, and the second thing is a structural issue, we have to take both these issue together.”
This would be done through the context of memorandum of understandings or various working groups which would be formed to take the matters forward during the days to come, he added.
Regarding rightsizing of the government, the minister said the committee he is chairing in term of right-sizing, its one part is concerned with cabinet committee on SOEs, we have taken five ministries, and are doing some deep dive, including Kashmir and GB, SAFRON, Industries & Production, IT &Telecom, and health”.
He also said that decisions regarding the ministries, which will be announced and owned by the prime minister.
It is important not to only give an idea but also implementation plan, along with the consideration towards the employees’ rights. “It’s all about re-engineering and refiguring the federal government,” he added. Because it’s very very important to devolve, the devolved subjects and cut the expenditure at the same time. This time it is not going to be about the talk, it’s going to be about the walk, he said.
He said that the Chinese government has commended Pakistan’s negotiations with the IMF and assured to play its role in securing approval from the Fund’s board.
On the issuance of Panda bonds, the Finance Minister said that China is ranked among the world’s biggest capital markets and Pakistan plans to issue these bonds to diversify its funding sources and strengthen its foreign exchange reserves by attracting Chinese investors.
Replying to another query, the minister said that “between now and the IMF board meeting Pakistan requires confirmation around external foreign financing, it has nothing to do with any re-profiling, any restructuring of Chinese energy debt.”
All the preconditions of the IMF programme have been met, structure benchmarks are there, which we have agreed to, after that there is external financing gap, that has been agreed over 37 months period, from my perspective it is very manageable.
Regarding the IMF programme, the finance minister further informed that the discussion with the Fund had remained positive and constructive, adding that all the set benchmarks were achieved.
From external financing perspective we are at very good place, the minister said.
They (IMF) have identified the gap over the programme period, the Fund said that they are providing $7 billion, for the remaining gap, this does not have to be covered in year one, you need to tell us what’s there in year one, two and three, the minister said. The gap in external financing is manageable, and can be easily covered in next three years, he claimed.
He said that the expansion of the tax to other sectors like retailers, real estate, builders and developers and agriculture would help to create a space to provide relief and reduce the burden from the existing taxpayers, adding that the government was fully determined to bring the untaxed and under-taxed sectors into the tax net.
The minister further informed that the government has returned approximately Rs68 billion in income tax refunds since July 1.
On FBR reforms, he said this is being led by the prime minister himself, the finance minister stated that Prime Minister Shehbaz Sharif was personally overseeing meetings every week. He said that digitalisation has brought two or three things into perspective in the last two months.
Through digital data analysis, the Federal Board of Revenue has identified about 4.9 million income tax non-filers, adding that those were pointed out on the basis of basic data regarding travelling abroad, a number of vehicles and others, he added.
Regarding sales tax side, the Aurangzeb said that approximately Rs600 billion in fake taxes were created and identified, however, only Rs1 billion had been recovered so far. On customs taxes, he said that on account of misclassification and under-invoicing there was a deficit of Rs 50 to 200 billion.
Replying to a query, he said that we have to go ahead with both the blocs (Chinese and American), China has always been a strategic partner, we see a lot of value in that relationship, and we look forward to CPEC phase two and we have discussed B to B partnership, of how to relocate the industry here and how we can provide support in this regard. So that’s going to be a very important partnership.
The second partnership that we have is with US and EU. US is our largest trading partner and EU in term of GSP plus and we are grateful to that partnership as well.