KATHMANDU, Aug 23: Amid rising public debt, the government has requested China to convert the loan taken for the construction of Pokhara Regional International Airport (PRIA) into a grant.

The government had signed an agreement to obtain approximately Rs 25.88 billion (1,338.74 million Chinese Yuan) from China’s Exim Bank for the construction of PRIA, based on the current exchange rate.

In response to criticisms that the loan from China is costly, the Ministry of Finance has formally requested that the loan be converted into a grant. Finance Secretary Ram Prasad Ghimire confirmed that a formal request has been sent to the Chinese government. "We have corresponded to convert the loan taken for PRIA into a grant," Secretary Ghimire said. "We are hopeful that China will respond positively."

A loan agreement was signed on March 21, 2016, for the construction of PRIA. Construction began on January 11, 2017, and was completed on January 1, 2023. However, as the airport has not yet started full-fledged commercial operations, the government is struggling to pay the loan interest, prompting the request to China to convert the loan into a grant.

On Thursday, Dhani Ram Sharma, head of the International Economic Cooperation Coordination Division at the Ministry of Finance, handed over the request letter to Yang Weiqun, Vice Chairman of the China International Development Cooperation Agency (CIDCA). Vice Chairman Yang Weiqun was approached by Deputy Prime Minister and Finance Minister Bishnu Paudel to convert the loan for the airport into a grant.

"We believe that the Chinese side will positively respond to the request of the Nepali government," Paudel said. The Chinese government had previously stated that the loan for PRIA falls under China's Belt and Road Initiative (BRI) program. The ruling party, Nepali Congress (NC), has mentioned that accepting loans under BRI projects is acceptable, considering the increasing burden of public debt.

Criticism has been directed at the high-interest rates on loans from China's BRI projects compared to loans from other donor agencies. The loan for the construction of Pokhara airport, taken from the Export–Import (Exim) Bank of China for 40 years, has an annual interest rate of 2.75 percent, which is significantly higher than those from other donor agencies such as the Asian Development Bank and the World Bank.

Although the agreement for the construction of Pokhara International Airport was made without a BRI agreement, China has been attempting to forcibly link PRIA to BRI projects.

Some analysts argue that after Nepal passed the Millennium Challenge Corporation (MCC) Compact agreement to build cross-border transmission lines and upgrade roads with a $500 million grant, China, feeling sidelined, has been trying to unilaterally link the airport project to BRI to demonstrate its strong political presence in Nepal.

"We have sent a letter to the Chinese government requesting that the loan for the construction of Pokhara airport be converted into a grant. We are hopeful that China will respond positively," said Finance Secretary Ghimire.

Meanwhile, China has pledged support to various other projects in Nepal under the BRI framework. On Thursday, the Ministry of Finance signed four cooperation agreements with China.

Ambassador of China to Nepal Chen Song said on his X post that a new batch of Belt and Road Initiative (BRI) project’s Letter of Exchanges (LoEs), including Kathmandu Ring Road (Phase II), Hilsa-Simkot Highway, Araniko Highway Upgrading (Phase IV) and ICD and ICP at Korala (Mustang) were signed by the visiting Vice Chairman of CIDCA, China and Finance Secretary Ghimire. The signing was witnessed by Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel and Ambassador Chen.

According to government officials, the agreements include cooperation for the construction of the 8.2-kilometer road from Kalanki to Basundhara Maharajgunj in the Kathmandu Valley, the upgrading of the Hilsa-Simikot section to a two-lane road, the development of an ICP and ICD at the Korala checkpoint in Mustang and maintenance, improvement, and landslide control programs on the Araniko Highway.

During the meeting with Vice Chairman Yang, Finance Minister Paudel requested Chinese government assistance for the infrastructure development of Bir Hospital, the feasibility study and DPR preparation for the Madan Bhandari Science and Technology University, and other infrastructure projects.

Vice Chairman Yang said that the request from the Nepali government had been received and that the Chinese side would review it and proceed with further processes.

 
• Nepal
 
• China
 
• BRI
 
• Pokhara_Airport
 
• Loan
 
• Grant