ISLAMABAD: A Memorandum of Understanding (MoU) is expected to be signed during the upcoming visit of Chinese Prime Minister Li Qiang to Pakistan, aimed at reprofiling $15.4 billion in debt related to power projects under the China-Pakistan Economic Corridor (CPEC), sources revealed on Tuesday.
Pakistan has proposed restructuring the loans tied to these power projects, which could increase its total repayment burden by approximately $1.22 billion. If a five-year extension for repayment is agreed upon, the total amount due would rise from $15.4 billion to $16.62 billion.
Prime Minister Li Qiang is scheduled to visit Pakistan this month to attend the Shanghai Cooperation Organisation (SCO) heads of government meeting on October 16. Pakistan will host the meeting from October 15 to 16, which will include discussions on financial, economic, and socio-cultural cooperation among SCO member states, preceded by a ministerial session and multiple rounds of senior officials’ meetings.
The visit, along with potential agreements, underscores the ongoing financial collaboration between Pakistan and China, particularly in the energy sector, as both nations work to address economic challenges and drive developmental projects under CPEC.
Pakistan’s Private Power Infrastructure Board and Chinese companies are set to sign the MoU regarding the debt reprofiling, with approval to be sought from Pakistan’s federal cabinet. The proposal includes a plan to defer payments to China for up to three years.
Pakistan and Chinese power companies are on track to finalize agreements for debt reprofiling and a moratorium on payments totaling over $16 billion, with payment deferrals of three to five years being considered.
Pakistan’s power sector has been burdened by high rates of power theft and distribution losses, leading to growing debt across the production chain—a concern noted by the International Monetary Fund (IMF).
Energy Minister Awais Leghari mentioned in July that the government is working to implement structural reforms aimed at reducing the “circular debt” by Rs100 billion ($360 million) annually.
