The Pakistan is seeking to reprofile over USD 27 billion in debt and liabilities with friendly nations, including China, Saudi Arabia, and the UAE, to secure a 37-month IMF bailout package. This effort aims to ease foreign exchange outflows and consumer tariffs in the energy sector, as reported by Dawn. Prime Minister Shehbaz Sharif confirmed that he has written to the Chinese government requesting debt reprofiling, a move seen as essential to securing a USD 7 billion economic bailout from the IMF by next month.
In addition to this, Islamabad has asked Beijing to convert imported coal-based projects to local coal and reprofile over USD 15 billion in energy sector liabilities. According to DW, Pakistan’s Chinese debt amounted to USD 26.6 billion in 2022, the highest for any country. Economist Safiya Aftab noted that Chinese loans are not concessional, and Pakistan’s poor absorption capacity has hindered progress on projects. Khalid, another economist, mentioned that while China often provides financial relief, it sometimes uses debt to its advantage.
Debt reprofiling involves restructuring a country’s debt by extending maturity dates, reducing interest rates, or altering other terms to make repayment more manageable. The IMF has previously expressed concerns about Pakistan’s external financing gaps.
The Shehbaz Sharif government is under pressure to lower electricity prices, which have sparked widespread protests led by Jamaat-e-Islami (JI). Protesters demand the withdrawal of taxes on power consumption, which have significantly increased bills. The government had approved a 26% increase in electricity costs for the fiscal year ending June 30, followed by another 20% hike in July, exacerbating public discontent amid rising inflation.
In response, Sharif has committed to reducing electricity prices to boost exports. A recent Gallup survey indicated growing pessimism among Pakistani business owners due to political instability and a new tax-heavy budget. Jamaat-e-Islami and Pakistan Tehreek-e-Insaf have also criticized the government’s handling of Independent Power Producers (IPPs), adding to Sharif’s challenges.
The World Bank defines debt reprofiling as modifications to the repayment schedule of a country’s debt through refinancing, debt substitution, or renegotiations. This process can help manage multiple loan maturities and mitigate currency risk, improving debt sustainability.
Prime Minister Sharif informed his cabinet that Chinese President Xi Jinping expressed interest in using local coal to reduce imports, potentially saving USD 1 billion in foreign exchange. Finance Minister Muhammad Aurangzeb had productive meetings in China, focusing on structural reforms to reduce circular debt.
Sharif praised China’s role in supporting Pakistan’s energy sector, crediting former Prime Minister Nawaz Sharif’s government for initiating the China-Pakistan Economic Corridor (CPEC). The government is also considering medium-term measures to address loans and capacity charges.
Additionally, Radio Pakistan reported that the federal cabinet has decided to exempt Chinese citizens from visa fees starting August 14. Sharif emphasized that joint ventures with China in various sectors, including mines and minerals, information technology, export zones, and the relocation of industry, will further strengthen the local economy.
Pakistan is seeking to reprofile over USD 27 billion in debt and liabilities with friendly nations, including China, Saudi Arabia, and the UAE, to secure a 37-month IMF bailout package. This effort aims to ease foreign exchange outflows and consumer tariffs in the energy sector, as reported by Dawn. Prime Minister Shehbaz Sharif confirmed that he has written to the Chinese government requesting debt reprofiling, a move seen as essential to securing a USD 7 billion economic bailout from the IMF by next month.
In addition to this, Islamabad has asked Beijing to convert imported coal-based projects to local coal and reprofile over USD 15 billion in energy sector liabilities. According to DW, Pakistan’s Chinese debt amounted to USD 26.6 billion in 2022, the highest for any country. Economist Safiya Aftab noted that Chinese loans are not concessional, and Pakistan’s poor absorption capacity has hindered progress on projects. Khalid, another economist, mentioned that while China often provides financial relief, it sometimes uses debt to its advantage.
Debt reprofiling involves restructuring a country’s debt by extending maturity dates, reducing interest rates, or altering other terms to make repayment more manageable. The IMF has previously expressed concerns about Pakistan’s external financing gaps.
The Shehbaz Sharif government is under pressure to lower electricity prices, which have sparked widespread protests led by Jamaat-e-Islami (JI). Protesters demand the withdrawal of taxes on power consumption, which have significantly increased bills. The government had approved a 26% increase in electricity costs for the fiscal year ending June 30, followed by another 20% hike in July, exacerbating public discontent amid rising inflation.
In response, Sharif has committed to reducing electricity prices to boost exports. A recent Gallup survey indicated growing pessimism among Pakistani business owners due to political instability and a new tax-heavy budget. Jamaat-e-Islami and Pakistan Tehreek-e-Insaf have also criticized the government’s handling of Independent Power Producers (IPPs), adding to Sharif’s challenges.
The World Bank defines debt reprofiling as modifications to the repayment schedule of a country’s debt through refinancing, debt substitution, or renegotiations. This process can help manage multiple loan maturities and mitigate currency risk, improving debt sustainability.
Prime Minister Sharif informed his cabinet that Chinese President Xi Jinping expressed interest in using local coal to reduce imports, potentially saving USD 1 billion in foreign exchange. Finance Minister Muhammad Aurangzeb had productive meetings in China, focusing on structural reforms to reduce circular debt.
Sharif praised China’s role in supporting Pakistan’s energy sector, crediting former Prime Minister Nawaz Sharif’s government for initiating the China-Pakistan Economic Corridor (CPEC). The government is also considering medium-term measures to address loans and capacity charges.
Radio Pakistan reported that the federal cabinet has decided to exempt Chinese citizens from visa fees starting August 14. Sharif emphasized that joint ventures with China in various sectors, including mines and minerals, information technology, export zones, and the relocation of industry, will further strengthen the local economy.
