Finance Minister Muhammad Aurangzeb and Planning Minister Ahsan Iqbal are heading to China this week to negotiate the restructuring of Pakistan’s $15.4 billion debt owed to Chinese energy projects. The visit comes at the behest of Prime Minister Shehbaz Sharif, who has prioritized extending the repayment period for debts owed to Chinese Independent Power Producers (IPPs).
The Pakistani government seeks to extend the repayment timeline by five years, aiming to reduce annual foreign currency outflows to $750 million. This extension would add $1.3 billion to the overall debt payment, totaling $16.6 billion by 2040.
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Currently, the debt repayment is front-loaded, requiring higher payments in the first decade. Pakistani authorities argue that extending the repayment period could lower electricity prices by Rs. 3 per unit.
If approved by China, the repayment schedule would stretch until 2040, initially reducing payments to $1.55 billion by 2025 and saving $580 million. However, payments would increase in the period from 2036 to 2040.
