Pakistan has begun discussions with China regarding the reprofiling of its power sector debt, in tandem with negotiations on structural reforms proposed by the International Monetary Fund, as disclosed by Pakistan's finance minister during a Sunday press conference.
He outlined that Pakistan plans to tackle the reprofiling of Chinese loans to the power sector on a project-by-project basis and is considering the appointment of a local advisor in China for this endeavor. The finance minister emphasized that this process involves reprofiling rather than restructuring, clarifying that there is no intention to reduce the debt amount owed. Reprofiling typically entails an extension of the repayment period agreed upon by both parties.
The two nations, longtime allies sharing a border, have historically relied on rollovers or disbursements of Chinese loans to satisfy Pakistan's external financing requirements. Pakistan is currently in discussions with Saudi Arabia, the UAE, and China to fulfill its gross financing needs as part of the IMF program, which requires board-level approval from Islamabad.
The IMF recently approved a $7 billion bailout for the heavily indebted South Asian economy, while expressing concerns over the high rates of power theft and distribution losses that contribute to debt accumulation throughout the production chain.
