Pakistan Seeks China's Help to Restructure $15 Billion Energy Debt

Pakistan is set to ask China to restructure its $15 billion energy debt to alleviate financial burdens. Finance Minister Muhammad Aurangzeb and Planning Minister Ahsan Iqbal will visit China to discuss converting Chinese coal-fired power plants to local coal and seek debt re-profiling approval.

Pakistan has decided to approach its all-weather ally China with a formal request to restructure its USD 15 billion energy debt to help the cash-strapped country wriggle out of its financial woes.

Planning Minister Ahsan Iqbal and Finance Minister Muhammad Aurangzeb are set to visit China this week, the Express Tribune newspaper quoted highly placed sources as saying. While Iqbal's visit was pre-planned, the finance minister is being sent as Prime Minister Shehbaz Sharif's special messenger, they added.

Iqbal is scheduled to attend the Global Development Initiative forum in China from July 11 to 13. As the finance minister's visit was not scheduled earlier, Pakistan's ambassador to Beijing has been instructed to arrange meetings with Chinese authorities, sources said. A Cabinet member, speaking on condition of anonymity, confirmed that the premier decided the issue of Chinese Independent Power Producers' debt should be immediately taken up for 're-profiling'.

According to sources, the finance minister will carry a letter from Prime Minister Sharif requesting debt restructuring. The delegation will also formally convey Pakistan's request to convert Chinese-imported coal-fired power plants to local coal. Habib Bank Limited is also engaged in the process. China has set up 21 energy projects in Pakistan costing USD 21 billion, with over USD 15 billion in outstanding debt.

The proposal involves extending debt repayments from 10 to 15 years, reducing the outflow of foreign currency by about USD 550 to 750 million annually and cutting prices by Rs 3 per unit. However, this extension would also mean an extra USD 1.3 billion payment to China. Despite raising average base tariffs by Rs 18 per unit over two years, Pakistan's circular debt has soared to Rs 2.65 trillion. The government is grappling with economic challenges and has not yet secured an IMF deal.

(With inputs from agencies.)