This week, Finance Minister Muhammad Aurangzeb will visit China to negotiate a restructure of the country’s $15.4 billion energy debt. He would be accompanied by Planning Minister Ahsan Iqbal as well, Since Prime Minister Shehbaz Sharif has made the “re-profiling” of debt due to Chinese Independent Power Producers (IPPs) a top priority, the visit by the finance minister was scheduled with little notice.The administration intends to extend the grace period for loan repayment, which could lower foreign exchange outflows to $750 million per year.
Pakistan requests a five-year reprieve from China on its energy debt. With this prolongation, the total amount paid to China by 2040 would be $16.6 billion, an increase of $1.3 billion.Customers are burdened with increasing expenditures due to the present power tariffs, which need debt servicing in the first ten years. According to Pakistani authorities, if China extends the loan repayment plan by five years, power rates will drop by Rs. 3 per unit.
With initial relief bringing installments down to $1.55 billion by 2025, saving $580 million, the payback period will be extended to 2040 if China agrees. It is anticipated that the same payouts will rise between 2036 and 2040.
