Pakistan seeks World Bank energy debt refinancing

Pakistan has approached the World Bank for its possible role in refinancing a $36 billion worth energy sector debt by multilateral and bilateral creditors, which it had taken in the past to install power projects.

The government sources told The Express Tribune that the preliminary proposal has been developed with an aim to replace the expensive foreign debt with relatively cheaper multilateral debt to reduce end-consumer price.

The cost of debt, including the repayment of principal loans, is part of the electricity price and is paid by the consumers including dividends to the sponsors of these projects. The sources said that the authorities have so far held meetings with the World Bank in addition to holding inter-ministerial discussions.

A spokesperson for the World Bank confirmed to The Express Tribune that in a meeting held on Thursday the power “minister mentioned about the $36 billion (energy debt) and asked whether development partners together can support them”.

Given the magnitude of the financing, no single lender can provide the $36 billion, said the sources.

During another meeting on Thursday, different ministries expressed divergent views and it was decided that the Power Division would fine-tune the proposal in consultations with the Economic Affairs Ministry, the government sources said.

According to the initial proposal, the government wants to lower the heavy power sector debt burden, by securing a concessional, long-tenure financing. It was seeking a 15 years debt repayment period, including around a four years grace period, they added.

The objective is to cut the energy prices to around ¢8-9 per unit, which translates into Rs25 per unit price.

The government has recently reduced the electricity prices for the industrial consumers to around Rs23 per unit but the actual bills cost was over Rs26 per unit. However, the residential consumers are still paying over Rs57 per unit price, which is unsustainable and has pushed them towards roof-top solar panels.