Nepal requests China to convert Pokhara Airport loan into grant

KATHMANDU: The government of Nepal requested China to change a loan for the Pokhara Regional International Airport (PRIA) construction from a loan to a grant because of the country's growing public debt. China's Exim Bank supplied the loan, which had been first agreed upon in March 2016 and was estimated to be worth Rs 25.88 billion (1,338.74 million Chinese Yuan). The airport was built between January 2017 and January 2023, although it hasn't started full commercial operations yet, which makes debt repayment more difficult.

Ram Prasad Ghimire, the finance secretary, verified that the Chinese government had received an official request to turn the loan into a gift. Dhani Ram Sharma of the Ministry of Finance presented the proposal to Yang Weiqun, Vice Chairman of the China International Development Cooperation Agency (CIDCA). Bishnu Paudel, the finance minister and deputy prime minister, spoke with Vice Chairman Yang about the issue as well and expressed optimism for a positive outcome.

The high-interest rates associated with the loan, at 2.75 percent annually, have been a point of contention compared to lower rates from other donor agencies like the Asian Development Bank and World Bank. Although the loan agreement for the Pokhara airport was not initially linked to China's Belt and Road Initiative (BRI), China has since attempted to associate the project with BRI to maintain political influence in Nepal, especially following Nepal’s acceptance of the Millennium Challenge Corporation (MCC) Compact.

In addition to the loan request, the Ministry of Finance signed four new cooperation agreements with China under the BRI framework. These agreements cover various infrastructure projects, including road construction and upgrades, a new checkpoint in Mustang, and maintenance programs for existing highways. These projects are part of China’s broader engagement with Nepal, which has included other BRI initiatives.

Finance Minister Paudel also sought Chinese assistance for additional infrastructure projects, including Bir Hospital’s development and feasibility studies for Madan Bhandari Science and Technology University. Vice Chairman Yang acknowledged receipt of Nepal's requests and indicated that China would review them and proceed with the necessary processes.