Pakistan has requested additional financing from the Asian Development Bank (ADB) to address significant debt within its power sector and refinance existing commercial loans. Power Minister Sardar Awais Leghari formally made the request Wednesday to an ADB delegation led by Ms. Leah Gutierrez, Director General, Central and West Asia Department.
Seeking Debt Relief and Grid Stability
The government is seeking to pay off Rs1.7 trillion in circular debt and refinance approximately Rs1.25 trillion in recently acquired commercial financing. The aim is to secure longer repayment terms and lower power tariffs, ultimately improving the stability of the national grid and encouraging increased electricity consumption.
According to informed sources, the minister proposed that the ADB explore financing options offering more affordable terms than current market rates, including extended repayment periods. This approach, it is hoped, would allow the government to avoid drawing from the national budget to cover debt repayments and instead fund them through power tariffs.
Challenges and Proposed Solutions
The request comes after the government secured Rs1.25 trillion from local commercial banks at Kibor minus 0.9pc, a debt now being serviced through a Rs3.23 per unit surcharge on consumers. The government is also pursuing the expansion of smart metering infrastructure through public-private partnerships.
Minister Leghari also emphasized Pakistan’s progress in transitioning to clean energy, noting that approximately 20GW of capacity has been converted. However, he stated that this shift has not been accompanied by dedicated financing for grid stabilization.
The government has removed excess power capacity under the Indicative Generation Capacity Expansion Plan (IGCEP) and is moving towards a competitive electricity market. A feasibility report aimed at attracting private investors is expected to be presented soon.
Frequently Asked Questions
What is “circular debt”?
Circular debt refers to a buildup of financial losses across the power sector, where payments are not made promptly between generating companies, transmission companies, and the government.
What is the Energy Surplus Package?
The Energy Surplus Package is a recently introduced initiative designed to increase electricity demand and encourage greater power offtake by the private sector.
What role is the private sector expected to play?
The government is seeking to attract private investment in the power transmission sector and plans to roll out smart meters through public-private partnerships.
How will Pakistan balance the transition to renewable energy with the need for a stable power grid?
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