Prime Minister Shehbaz Sharif said on Friday that he had written a letter to the Chinese government seeking debt reprofiling for Pakistan. This move aims to secure the International Monetary Fund’s approval for a $7 billion bailout by next month.
“I have written a letter to China, it’s a matter of public domain now, for [debt] reprofiling,” the PM stated during a federal cabinet meeting.
As per media reports, PM Shehbaz informed the federal cabinet that Chinese President Xi Jinping showed “keen interest in his idea” of using local coal for power generation to reduce imports. “I told the president that Thar coal could help Pakistan cut down on imports and save $1 billion in foreign exchange,” the PM said.
On Sunday, Finance Minister Mohammad Aurangzeb said that Pakistan is in dire need of a three to five-year extension on the maturity of $12 billion in debt from Saudi Arabia, China, and the UAE to secure approval from the IMF’s Executive Board for a new bailout package.
Upon his return from China, the finance minister said during a press conference that the country is not seeking additional foreign loans but is requesting the re-profiling of existing foreign deposits. This includes $5 billion from Saudi Arabia, $4 billion from China, and $3 billion from the UAE.
The finance minister said that the IMF demanded external financing assurances for the 37 months under the $7 billion Extended Fund Facility (EFF).
The South Asian nation had initially borrowed these funds for one year and has been securing extensions due to an inability to repay. The current request to reschedule the debt for three to five years aims to reduce uncertainty at the time of loan maturities.
Most of the funds secured from the KSE and the UAE were used to boost the country’s forex reserves and to meet other financial needs while most of the Chinese loans were used to install power plants under the China-Pakistan Economic Corridor (CPEC).
‘Reducing electricity prices key agenda’
The state-run news agency APP reported that Prime Minister Shehbaz Sharif while chairing a cabinet meeting, stated that the government was focused on providing relief to electricity consumers, as reducing electricity prices was a key agenda for the government.
PM Sharif emphasised that without a reduction in power prices, neither the agricultural sector nor the industrial sector could expand effectively. Competitiveness in the industry was directly linked to lower electricity prices.
He noted that the PML-N government had resolved the 20-hour daily load-shedding issue. At that time, few were willing to invest in electricity production, with China being the only country showing interest in investing in power generation. In 2015, the prime minister mentioned that some of the fastest power-producing plants in history were installed.
He said that agreements with the power producers should not be criticized, as they represented a sincere effort to address Pakistan’s most pressing challenge. Efforts were underway to resolve issues with Independent Power Producers (IPPs) as the issue could not be resolved overnight.
