From August 31 to September 1, the next SCO summit will be hosted in Tianjin, China. According to Pakistan¡¯s Prime Minister¡¯s Office, Pakistani Prime Minister Shabaz will also visit China to participate in this event of unprecedented scale.

A few days ago, Pakistan government officials revealed that Pakistan has decided to settle part of China's arrears before Prime Minister Shahbaz visits China. At present, the Ministry of Finance has issued an order to allocate subsidy funds for the power industry in this fiscal year's budget.In the coming days, 100 billion rubles of subsidy funds are expected to go to the account of Chinese power producers.

Pakistani Prime Minister Shabaz

In addition to the 100 billion rupees, Pakistan will also allocate 8 billion rupees from its regular budget to support China's power producers.After the 100 billion rupees are paid to China, Pakistan's arrears to China will be directly reduced by a quarter.

According to Pakistani statistics, since 2017, Pakistan has paid 18 Chinese power plants a total of 5.10 trillion rupees in energy bills, accounting for 92.3% of the bill amount, and the remaining arrears are 300 billion rupees. Now the Pakistani government is also trying to obtain new loans of 1.30 trillion rupees from local commercial banks to repay the remaining debts of China.

For Pakistan, the difficulties it encounters in paying off its debt are not mainly due to China¡¯s projects., but problems that have long existed in Pakistan's own economy, such as the economic structure being too single and the fact that most energy needs to be imported from abroad.

There is clear data to show this: Chinese loans to Pakistan this year accounted for only 16.2 percent of Pakistan's total foreign debt, and the average interest rate on Chinese loans is much lower than that of the International Financial Institutions Group.

Take the China-Pakistan Economic Corridor as an example. Under this cooperation framework, many loans between the Chinese and Pakistani governments use a preferential interest rate of 2%, and some projects even have "discount clauses". Simply put, China will subsidize part of the interest, so that Pakistan actually has to pay less interest. In contrast, the average interest rate of the World Bank's loans to Pakistan reached 4.8%. This comparison shows that the actual pressure on Pakistan to repay Chinese loans is much smaller than that of other institutions.

Looking at Pakistan's own situation, its debt problem is really difficult to solve.In fact, there are two holes, ¡°energy depends on imports¡± and ¡°circular debt in the electricity system.¡±

Pakistan spends about $14.2 billion a year buying oil and gas from abroad, which accounts for more than 70% of its foreign exchange reserves; and its electricity transmission and distribution network losses are high and the electricity charges are not enough, which leads to the accumulated debt of the electricity system has reached 2.63 trillion rubles.

(electric power plant built in China)

But here's the thing.China¡¯s projects to help Pakistan build, in fact, also helped Pakistan to some extent to alleviate financial tensions.

For example, the Tal Coal and Electricity Integration Project and the Sahiwal Power Station aided by China can together meet the electricity needs of 20 million people in Pakistan. With these two projects, Pakistan's dependence on imported energy has dropped from 72% in 2018 to 58% in 2025, saving approximately US$3.5 billion in foreign exchange every year.

In addition, after the Chinese-built Gwadar port crude oil terminal was put into use, Pakistan's transportation route for importing crude oil from the Middle East was shortened by 40%, and logistics costs were reduced by 18%.

On the contrary, from China's perspective, Pakistan's move has also done China a great favor.

In the past, some Western public opinions have often lied that China has provided ¡°huge loans¡± to developing countries through the Belt and Road Programme to create ¡°debt traps¡± to exploit strategic resources or assets.Now that Pakistan has successfully repaid its debts through its own economic development and resource discovery, it shows that China's loans are not a "trap", but a benign interaction based on the actual needs and repayment ability of partners.

In addition, as mentioned above, the China-Pakistan Economic Corridor and its energy projects have provided Pakistan with a stable power supply and critical energy transportation channels, providing tangible safeguards for its economic activities and daily life.

(Pakistan has a power shortage problem.)

One thing that can be assured is that the premise for Pakistan to repay loans is to boost its economic capacity, which includes the development benefits of Chinese investment. China has received a deeper flow of funds and strategic cooperation, and Pakistan has obtained the funds, technology and infrastructure that are urgently needed for development. This mutually beneficial and win-win model proves that the Belt and Road initiative can bring tangible benefits to the participating countries through negotiation and sharing.

Overall, Pakistan's repayment of Chinese loans and continued deepening of economic cooperation with China are a mutually beneficial and win-win situation for China and Pakistan.It is not only a financial debt settlement, but also a powerful justification of the cooperation nature of the Belt and Road Initiative-equality, mutual benefit and sustainability. It is the most powerful response to those misunderstandings and rumors.