Islamabad, July 27: During a visit to Beijing, Pakistan Finance Minister Muhammad Aurangzeb and Energy Minister Sardar Awais Laghari met with Chinese Finance Minister Lan Fo’an to request significant relief from Pakistan’s mounting power sector debts. The Pakistani delegation sought an extension of eight years for repaying energy debts, proposed converting US dollar-based interest payments into Chinese currency, and requested reductions in interest rates for both CPEC and non-CPEC Chinese-funded projects.
The request is part of Pakistan’s broader strategy to address its growing debt crisis. Outstanding dues for China-Pakistan Economic Corridor (CPEC) power projects have surged by 44% to PKR 401 billion by the end of the last fiscal year. The ministers’ discussions also included a plea for rescheduling debts, which they argue are crucial to lowering energy costs and securing a USD 7 billion bailout package from the International Monetary Fund (IMF).
The IMF has expressed concerns over high rates of power theft and distribution losses in Pakistan, which exacerbate the country’s debt situation. The IMF’s Executive Board is expected to review the bailout package in mid-August, following a staff-level agreement reached on July 12.
China has invested over USD 20 billion in energy projects in Pakistan, which have previously helped meet external financing needs. The two countries also discussed reforms in Pakistan’s tax and energy systems aimed at improving economic stability.
Since its independence in 1947, Pakistan has received 23 bailout packages from the IMF, with current obligations totaling approximately USD 8.4 billion to be repaid over the next three to four years. The IMF has emphasized the need for structural reforms in Pakistan’s power sector to address the systemic issues contributing to its debt.