ISLAMABAD: Pakistan has commenced discussions to reprofile its power sector debt to China, alongside deliberations on structural reforms proposed by the International Monetary Fund (IMF), Finance Minister Muhammad Aurangzeb announced at a press conference on Sunday.
Minister Aurangzeb clarified that the reprofiling process, which involves extending the repayment period rather than reducing the debt amount, will be handled on a project-by-project basis. He also mentioned that Islamabad is planning to appoint a local adviser in China to facilitate this process.
Reprofiling, distinct from restructuring, signifies an agreed extension of the repayment timeline without altering the debt’s principal amount. This strategic approach aims to ease Pakistan’s financial burden while maintaining its commitment to repay its obligations.
Pakistan and China, which share a longstanding alliance, have a history of financial cooperation. In the past, rollovers or disbursements of loans from China have been instrumental in helping Pakistan meet its external financing needs.
In addition to the talks with China, Pakistan is also engaging in negotiations with Saudi Arabia and the United Arab Emirates. These discussions are crucial for meeting the gross financing requirements under the IMF programme, which necessitates board-level approval.
This month, the IMF approved a $7 billion bailout package for Pakistan’s heavily indebted economy. However, the IMF has raised concerns about the high rates of power theft and distribution losses within Pakistan’s power sector, which contribute significantly to the accumulation of debt across the production chain.
The reprofiling talks with China are seen as a crucial step towards addressing these financial challenges. By extending the repayment timeline, Pakistan aims to create a more manageable debt repayment schedule, allowing the country to stabilize its economy while implementing the necessary structural reforms.
As these discussions progress, the outcomes will be closely monitored by financial analysts and international stakeholders, who are keen to see how Pakistan navigates its economic challenges and reforms its power sector to achieve long-term sustainability.
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