ISLAMABAD: The government is in talks with International Financial Institutions (IFIs) and Saudi Arabia to secure loans worth $36 billion over 13 years starting FY2027 to refinance the power sector’s mounting debt-servicing burden, a move aimed at lowering electricity tariffs—particularly for industry, well-informed sources told Business Recorder.
According to the sources, discussions with IFIs, including the World Bank and the Asian Development Bank (ADB), are centered on financing at an interest rate of around 2 per cent, while funding from Saudi Arabia is being explored at a lower rate of 1 per cent. The Power Division has already presented its refinancing proposals to the ADB and World Bank during meetings held in recent months.
Under the proposed plan, refinancing would be spread over 13 years, with annual requirements as follows: $4.40bn in FY27; $4.18bn in FY28; $4.44bn in FY29; $3.97bn in FY30; $3.19bn in FY31; $3.22bn in FY32; $2.91bn in FY33; $2.52bn in FY34; $2.22bn in FY35; $1.40bn in FY36; $1.36bn in FY37; $1.28bn in FY38; and $1.21bn in FY39.
The power sector’s circular debt currently stands at around Rs1.8 trillion, but the government aims to cap it at Rs1.6 trillion by June 30, 2026. Recently, the government raised Rs1.225 trillion from commercial banks to reduce circular debt and decided to continue recovering the Debt Service Charge at Rs3.23 per kWh for the next six years, with the objective of bringing it to zero.
If refinancing is secured from IFIs at 2 per cent, industrial electricity tariffs are projected to fall to 8.70 cents/kWh in FY27, gradually fluctuating to 9.18 cents/kWh by FY39. In contrast, if financing is arranged from Saudi Arabia at 1 per cent, the revised industrial tariff would be lower—8.62 cents/kWh in FY27, easing to 9.03 cents/kWh by FY39.
Officials believe the refinancing plan could significantly ease pressure on the power sector, enhance financial sustainability, and improve the competitiveness of Pakistani industry through more affordable electricity tariffs.
Story by Mushtaq Ghumman
