Kabira
BANNED
![](/styles/default/xenforo/ranks/General.jpg)
- Joined
- Jul 12, 2014
- Messages
- 14,383
- Reaction score
- -20
- Country
- Location
KARACHI: In a detailed look at the China-Pakistan Economic Corridor (CPEC), the International Monetary Fund (IMF) cautions that corridor projects will generate outflows of as much as $4.5 billion by 2024, while the export benefits of the projects “will likely accrue gradually over time”. Filling the gap in between could pose a policy challenge.
“These considerations warrant policymakers’ attention to two priority areas in order to realise the transformational potential of Pakistan’s investment programme while maintaining external stability,” the IMF report says.
The first challenge is to ramp up export revenue and build foreign exchange buffers, which “will be important to cushion the period of increased BoP outflows”. Ramping up exports will require “improving competitiveness and the business climate” in order to realise the potential benefits from the increased energy supplies and transport infrastructure that the corridor projects will create.
The second big challenge is bringing “full cost recovery” in power distribution. “Routing the increased generation capacity through a loss-making distribution sector could result in faster accumulation of circular debt and fiscal costs, as well as undermine long-term financial sustainability of the new energy projects,” the report adds.
The report stops short of advocating a specific path for improving recoveries, but points towards greater private-sector participation in metering and recoveries while “maintaining a strong and enabling regulatory framework”. The language could be aimed at the government’s proposed reforms to the Nepra Act that seek to parcel out many of the powers the regulator currently enjoys to the federal and provincial governments and their departments.
The report also cautions against going too far down the road of granting incentives to certain categories of investor. It urges the government to “rationalise and limit tax incentives and exemptions [and] maintain uniformity of the tax regime with respect to all investments” and ensure that new external commitments are in line with expected balance of payments trends.
The report notes the positive impact that CPEC projects can have on Pakistan’s economy. It says the direct impact of corridor projects on GDP will go from $2bn in 2017 to $4bn by 2024. By that point in time, the indirect, second-round impacts could commence, which could be “significant” but “will depend on many other supportive factors.”
The report notes that the investments coming under the early-harvest scheme could close Pakistan’s power deficit as 8,600MW are envisaged to be commissioned under CPEC over the next seven to nine years, out of a total capacity expansion of 24,000MW currently in the investment plan. “[T]his expansion will help eliminate Pakistan’s deficit of about 6GW in 2016 to a surplus as early as end-2018.”
Published in Dawn, July 15th, 2017
https://www.dawn.com/news/1345414/cpec-outflows-to-peak-at-45bn-imf
“These considerations warrant policymakers’ attention to two priority areas in order to realise the transformational potential of Pakistan’s investment programme while maintaining external stability,” the IMF report says.
The first challenge is to ramp up export revenue and build foreign exchange buffers, which “will be important to cushion the period of increased BoP outflows”. Ramping up exports will require “improving competitiveness and the business climate” in order to realise the potential benefits from the increased energy supplies and transport infrastructure that the corridor projects will create.
The second big challenge is bringing “full cost recovery” in power distribution. “Routing the increased generation capacity through a loss-making distribution sector could result in faster accumulation of circular debt and fiscal costs, as well as undermine long-term financial sustainability of the new energy projects,” the report adds.
The report stops short of advocating a specific path for improving recoveries, but points towards greater private-sector participation in metering and recoveries while “maintaining a strong and enabling regulatory framework”. The language could be aimed at the government’s proposed reforms to the Nepra Act that seek to parcel out many of the powers the regulator currently enjoys to the federal and provincial governments and their departments.
The report also cautions against going too far down the road of granting incentives to certain categories of investor. It urges the government to “rationalise and limit tax incentives and exemptions [and] maintain uniformity of the tax regime with respect to all investments” and ensure that new external commitments are in line with expected balance of payments trends.
The report notes the positive impact that CPEC projects can have on Pakistan’s economy. It says the direct impact of corridor projects on GDP will go from $2bn in 2017 to $4bn by 2024. By that point in time, the indirect, second-round impacts could commence, which could be “significant” but “will depend on many other supportive factors.”
The report notes that the investments coming under the early-harvest scheme could close Pakistan’s power deficit as 8,600MW are envisaged to be commissioned under CPEC over the next seven to nine years, out of a total capacity expansion of 24,000MW currently in the investment plan. “[T]his expansion will help eliminate Pakistan’s deficit of about 6GW in 2016 to a surplus as early as end-2018.”
Published in Dawn, July 15th, 2017
https://www.dawn.com/news/1345414/cpec-outflows-to-peak-at-45bn-imf