Pakistan’s power sector will remain vulnerable to exchange rate fluctuations for up to eight years due to dollar-indexed investments, particularly projects under the China-Pakistan Economic Corridor (CPEC).
On Wednesday, the federal government sealed a financing deal of Rs1.225 trillion with 18 commercial banks in a bid to retire the power sector’s ballooning circular debt.
However, Federal Minister for Power Sardar Awais Leghari said on Friday that power plants commissioned after 2015, with a generation capacity exceeding 11,000 megawatts, were financed in US dollars and have locked-in tariffs and debt servicing tied to the dollar.
“Dollar-linked debt will remain sensitive to exchange rate fluctuations for the next 7–8 years,” he said, noting that when contracts were signed under the PML-N government, the exchange rate stood at Rs100 to a US dollar.
“The Rs18 per unit capacity charge today would have been Rs8–9 lower if the rate had remained unchanged.”
Leghari did not comment on whether the government plans to revise post-2015 contracts as it had done with pre-2015 IPPs and state-owned plants, noting that Islamabad has sought concessions from Beijing on CPEC power terms with limited success.
