ISLAMABAD: Pakistan has approached the World Bank for guidance on refinancing its $36 billion energy sector debt, which was incurred over the past decade to finance power projects. The government aims to replace expensive loans with cheaper, long-term multilateral financing to reduce electricity costs for consumers.
According to sources, the proposal envisions a concessional debt facility with a 15-year repayment period, including a four-year grace period, to lower the heavy financial burden on the power sector. Officials indicated that refinancing could potentially cut power prices to 8–9 US cents per kWh (around Rs25 per unit).
The initiative was discussed in meetings between Power Minister Sardar Awais Laghari, the World Bank country head Bolormaa Amgaabazar, and senior officials of the Power Division. The World Bank confirmed that it shared global experiences that could help Pakistan develop a financing mechanism but noted that details of financial support had not yet been agreed upon.
Government sources suggested that, if multilateral creditors collaborate, they might provide $1–2 billion annually to repay maturing energy debts. The debt largely comprises loans for CPEC power projects, taken at commercial interest rates of Libor plus 4.5%, and is currently contributing to high tariffs for both industrial and residential consumers.
While the Power Division confirmed ongoing engagement with international financial institutions to explore green and climate-aligned financing, it clarified that no formal proposal for debt refinancing or re-profiling has been finalized.
Previously, Pakistan had negotiated with Chinese authorities and SINOSURE in 2024 for restructuring energy debt, including proposals to extend repayment periods, convert dollar-denominated loans to Chinese currency, and reduce interest rates, all aimed at lowering electricity costs and easing fiscal pressure on the sector.
The government hopes that refinancing through multilateral lenders will alleviate the cost of electricity, encourage industrial competitiveness, and support long-term sustainability in the power sector.
Story by Shahbaz Rana
