Pokhara Airport in Debt Spiral; Chinese Embassy Sends Diplomatic Note

The Pokhara International Airport, funded by loans from China, finds itself mired in a complex web of debt and diplomatic tension. Recent developments have seen the Chinese Embassy in Nepal issuing a pointed diplomatic note to the Nepalese government, highlighting discrepancies in the project’s execution and loan utilization.

Amidst these developments, the Ministry of Tourism has initiated inquiries, urging the Nepal Civil Aviation Authority to furnish clarifications and assessments regarding the diplomatic notes received via the Ministry of Foreign Affairs and the Ministry of Finance.

At the heart of the matter lies the loan agreement inked between the Ministry of Finance and the China Export-Import Bank in March 2016, with a looming deadline set for May 31, 2024.  However, according to the diplomatic note sent by the Chinese Embassy, it is mentioned that as of now, 15 percent of the amount stipulated in the agreement remains untaken. If the remaining amount is not disbursed, it will be automatically canceled after the end of the loan period.

Similarly, since the handover certificate was issued on 29 December 2022 and the defect notification period expired on 28 December 2023, the embassy has requested expediting the takeover process.

Embassy’s diplomatic note dated January 23, 2024, and the Ministry of Foreign Affairs’ letter dated January 29, 2024, were received by the Ministry of Tourism for review through the Ministry of Finance. Subsequently, the Ministry of Tourism instructed to provide the necessary details along with the opinion from the relevant authority as soon as possible.

During the construction of the airport, Pradeep Adhikari, the Director-General of Nepal Civil Aviation Authority, served as the project leader. Furthermore, logistical hurdles have impeded the airport’s functionality since its inauguration over a year ago, rendering it incapable of accommodating international flights. Meanwhile, the Abuse of Authority Investigation Commission has intensified its investigation into suspicions of irregularities during the airport’s construction.

The construction of this airport started on 2 August 2016 after the agreement between the government and the Chinese state-owned contractor CAMCE. To build the Pokhara airport, the government signed an agreement with China’s Exim Bank and took a loan of 1.37 billion Chinese yuan. No need to pay 25 percent interest on it. There is 2 percent interest on the remaining amount. This is an expensive interest rate. The interest on loans taken from international donor agencies is less than 1 percent. This loan has a grace period of 7 years and is to be repaid in a total of 20 years.

The Pokhara International Airport saga epitomizes the complexities inherent in infrastructural projects financed through foreign loans, underscoring the importance of meticulous planning, oversight, and adherence to contractual obligations. As Nepal grapples with the repercussions of this debt spiral, diligent efforts must be undertaken to navigate through the challenges and secure the future viability of the airport.