Finance Minister Muhammad Aurangzeb along with Planning Minister Ahsan Iqbal will visit Beijing in the quest to request the restructuring of $15 billion in energy debt.Â
According to a news report, Pakistan’s ambassador to Beijing has been instructed to arrange meetings with Chinese authorities. While Iqbal’s visit was pre-planned, Aurangzeb’s trip is a special mission from Prime Minister Shehbaz Sharif.Â
Iqbal will attend the Global Development Initiative forum from July 11th to 13th. Aurangzeb will carry a letter from the Prime Minister requesting debt restructuring.
The delegation will also formally convey Pakistan’s request to convert Chinese-imported coal-fired power plants to local coal. The government proposes to help Chinese investors secure loans from local banks for this conversion, with Habib Bank Limited (HBL) involved in the process.
China has established 21 energy projects in Pakistan, costing a total of $21 billion, including about $5 billion in equity. Chinese investors took loans for these projects at rates equal to the London Interbank Offered Rate (Libor) plus 4.5%. Payments against the remaining $15 billion Chinese energy debt would total $16.6 billion by 2040.
The proposal includes extending debt repayments from 10 to 15 years, which would reduce foreign currency outflow by $550 million to $750 million annually and lower prices by Rs3 per unit. However, this extension would result in an additional $1.3 billion payment to China over time.
Pakistan owes over Rs500 billion in outstanding dues to Chinese IPPs, and China seeks assurance of security for its nationals in Pakistan. IMF restrictions on repayments have also affected Chinese energy deals. If China agrees to restructure the debt, the repayment period will extend to 2040, reducing the repayment amount this year by $600 million and providing significant relief in the short term.
