Pakistan Finance Ministry fails to provide sovereign guarantee to residents

Pakistan: Pakistan Finance Ministry failed to provide a sovereign guarantee to residents; now, the fifth unit of the Chashma Nuclear Power Generating Station, C5, hit a snag, as per the reports.

The government of China agreed to provide finance for up to 85 percent of the USD 3.7 billion nuclear power plant project, which comes under a sovereign.

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The sovereign guarantee assures the creditor that the administration will satisfy the obligation if the primary obligor defaults on the loan payments. Here, Pakistan Atomic Energy Commission (PAEC) is one.

It seems like the International Monetary Fund (IMF) programme has tied the Pakistan Government’s hands with regard to the sovereign guarantee. The 2022-23 budget laid before the National Assembly a Statement of Contingent Liabilities, as per reports.

They made a list which contains the guarantee, which is expected to be an issue during the fiscal year. The government is behaving like a ceiling to contain fiscal risks and safeguard the public debt trajectory.

Currently, PAEC has been running four nuclear power units based on Chinese technology near Chashma, Punjab. With a nameplate power of 325MW each, C-1 and C-2 began operations in 2000 and 2011, respectively. C-3 and C-4 became operational in 2016 and 2017, respectively, and have a gross capacity of 340MW each.

Individually, PAEC also established Karachi Nuclear Power Plant Unit-2 and Unit-3 at Paradise Point, once a popular public beach on the outskirts of Karachi. The two units have a nameplate capacity of 1,100MW each. K-2 and K-3 started generating electricity in 2021 and 2022, respectively.

Yesterday, on Monday, the team of IMF reached Pakistan to review under USD 7 billion Extended Fund Facility (EFF).

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The visit of the IMF to Pakistan was scheduled for October, but it was delayed because of IMF and Pakistan’s differences in their commitment to fiscal consolidation.

According to a Financial Post report, “Pakistan and global lender started their talks virtually, but they still have differences over tax collection targets, including high gas prices, high circular debts, overrun expenditure making consensus harder to strike on a staff-level agreement for completion of the review,” according to the Financial Post report.

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