Finance Minister to Visit China This Week For $15 Billion Energy Debt Restructuring

Finance Minister Muhammad Aurangzeb will go to China this week seeking restructuring of $15.4 billion Chinese energy debt. Planning Minister Ahsan Iqbal will also accompany him, reported Express Tribune. The finance minister’s visit was arranged on short notice as Prime Minister Shehbaz Sharif has prioritized the “re-profiling” of debt owed to Chinese Independent Power Producers (IPPs). The government wants to expand the timeframe for making debt repayments, potentially reducing foreign currency outflows to $750 million annually. Pakistan wants a five-year extension on the repayment of Chinese energy debt. This extension would increase payment to China by an additional $1.3 billion, bringing the total to $16.6 billion by 2040. The current power tariffs require debt servicing in the first 10 years, burdening consumers with higher costs. The Pakistani authorities are of the view that electricity prices will be reduced by Rs. 3 per unit if China extends the debt repayment plan by five years. If China agrees, the repayment period will extend to 2040, with initial relief reducing repayments to $1.55 billion by 2025, saving $580 million. However, the same payments are expected to increase from 2036 to 2040.