Pakistan has formulated a proposition to encourage a reevaluation of the $15.4 billion energy debt owed to China with the aim of reducing domestic electricity rates.
According to Express Tribune, the government intends to extend the repayment period for debts, which could result in a reduction of foreign currency outflows to $750 million annually and a reduction of energy prices by Rs. 3 per unit.
Further information indicates that Pakistan is seeking a five-year extension to repay its energy debt to China. By 2040, the aggregate payment to China would have increased by $16.6 billion, or an additional $1.3 billion, due to this extension. China has not yet been presented with this proposal.
Precarious appears the situation in Pakistan, given that the existing tariffs necessitate debt servicing within the initial decade, thereby imposing increased expenses on consumers. Pakistani authorities are of the opinion that a five-year extension of China’s debt repayment plan will result in a reduction of electricity prices by Rs. 3 per unit.
A $580 million savings would result from initial respite reducing repayments to $1.55 billion by 2025, contingent upon China’s agreement to extend the repayment period to 2040. Nevertheless, an escalation in said payments is anticipated between 2036 and 2040. Beijing has not yet been apprised of the proposal.
It is noteworthy to mention that during the second week of June, Prime Minister Shehbaz Sharif is scheduled to embark on a visit to China.
Notably, the International Monetary Fund (IMF) has inquired about Pakistan’s intentions to decrease electricity prices, the realization of which, according to officials, is contingent on China’s contract reopening.
Local media outlets reported on Wednesday that the federal government informed the IMF that the average electricity tariff would increase from Rs. 5 to Rs. 7 per unit in July, based on annual adjustments. On the same day, however, Sardar Awais Ahmad Khan Leghari, the federal minister for power, stated unequivocally that there have been no discussions with the IMF regarding an increase in the power tariff.
The minister referred to reports of a power tariff increase as “misinformation” and stated that discussions with the IMF are centered on power sector reforms in a message published on X.
