ISLAMABAD, 23 July 2025 — Pakistan’s energy sector is facing a major financing roadblock as Chinese institutions express growing reluctance to fund new energy ventures, citing economic instability, security concerns, and previous repayment issues.
According to sources, several Pakistani energy companies have approached China for loans to upgrade infrastructure and expand capacity. However, Sinosure—the China Export & Credit Insurance Corporation—has been hesitant to provide the essential risk insurance required for Chinese banks to release funds.
Sinosure’s reservations stem from three critical issues raised during recent talks with Pakistani delegations in Beijing:
- Limited Dollar Reserves: Chinese firms operating in Pakistan have struggled to repatriate profits due to foreign exchange shortages. Beijing has asked for clear assurances on how Pakistan plans to meet future debt repayments in U.S. dollars.
- Security Risks: Attacks on Chinese engineers working on development projects have heightened safety concerns, discouraging further engagement without robust security guarantees.
- Past Repayment Failures: Several Chinese lenders have experienced delays in repayments for previously financed projects, further undermining confidence in Pakistan’s creditworthiness.
Efforts to secure funding for oil refinery upgrades under the Shehbaz Sharif government’s new refinery policy have also stalled. Although the policy offers incentives to improve fuel quality and boost production, inconsistent taxation—such as fluctuating sales tax exemptions and the imposition of petroleum and carbon levies—has created financial uncertainty.
The imposition of levies on furnace oil, raising its price by 80%, has led to a collapse in domestic sales, forcing refineries to seek export options. Current furnace oil sales in July have plummeted to just 2,500 metric tons—equivalent to a single day’s volume in previous years.
“Under such volatile conditions, no financial institution will risk lending to refineries,” an industry official stated.
Despite Petroleum Minister Ali Pervaiz Malik’s attempts to resolve sectoral challenges, industry stakeholders remain skeptical due to the government’s budgetary neglect and ongoing policy inconsistencies. As a result, Chinese financial institutions are adopting a wait-and-see approach, leaving Pakistan’s energy ambitions in limbo.
Story by Zafar Bhutta
