The Pakistani government has formed the Power Sector Financing Steering Committee to negotiate a three-year deal for staggered debt repayments, explicitly stating that there is no connection between this debt rescheduling and new IMF loans.
The committee’s goal is to manage the repayment of $15.4 billion owed to Chinese Independent Power Producers (IPPs) by extending the repayment period to 2036. This extension aims to provide a 3 to 5-year breathing space and potentially allow the government to lower power tariffs by Rs 2 to 3 per unit for consumers.
A high-ranking official clarified that there are no links between the debt rescheduling and the IMF’s $7 billion Extended Fund Facility (EFF). The IMF’s conditions do not include requirements related to restructuring debt with Chinese IPPs. The newly formed committee, led by the Finance Minister and including the Minister for Power Awais Leghari, the Finance Secretary, and the Power Secretary, will receive weekly updates due to the complexity of the process. The government is also considering hiring a consultant in China to assist with negotiations.
Initially, the process will involve government-to-government discussions, followed by separate negotiations with Chinese IPPs and their financing banks. Each IPP’s agreement will need to be revised and signed by both parties. Currently, Pakistan is scheduled to repay $15.4 billion by 2036, with payments decreasing annually.
Pakistan has proposed extending the repayment period by five years. If this extension is approved, the revised repayment schedule would involve amounts such as $1.63 billion in 2024, $1.55 billion in 2025, and so on, extending to 2041. This extension would increase the total repayment from $15.4 billion to $16.62 billion.
