Pakistan has begun consultations with the World Bank and other development partners on whether part of its heavy energy-sector debt can be refinanced to reduce electricity costs and stabilize the power market, government and lender sources said this week.
Officials said the government is examining options to restructure around $36 billion in loans accumulated over the past decade for power generation projects. The aim is to replace high-cost commercial and bilateral borrowing with longer-term, lower-interest multilateral financing.
A World Bank spokesperson confirmed that the matter was raised during a recent meeting with Pakistan’s power ministry but said the lender had sought further details before any formal assessment could be made.
Why Government is Exploring Refinancing
Debt servicing costs, including loan repayments and returns guaranteed to power producers are embedded in electricity tariffs and passed on to consumers. Officials say refinancing could ease this burden and help bring prices down.
| Financial Indicator | Current Situation | Government Target |
|---|---|---|
| Total energy-sector debt | About $36 billion | To be restructured |
| Typical loan profile | Commercial/bilateral, shorter tenor | Concessional, long-term |
| Desired repayment period | — | ~15 years |
| Grace period sought | — | ~4 years |
| Average power price | Rs. 26+ per unit (industrial bills) | ~Rs. 25 per unit |
| Residential tariff | Over Rs. 57 per unit | To be reduced |
Policy Discussions
Power Minister Sardar Awais Ahmad Khan Leghari met World Bank Country Director Bolormaa Amgaabazar earlier this week to discuss the issue, according to people familiar with the talks. Officials from the Power Division and the ministry were also present.
While officials privately acknowledge work on a refinancing concept, the Power Division publicly denied that any formal proposal is under active consideration.
A spokesperson said the division’s focus is on structural reforms, boosting demand, and pursuing green and climate-linked financing to improve efficiency and moderate tariffs over time.
Legacy of Past Borrowing
Pakistan expanded its power generation capacity rapidly over the last decade, largely with financing from Chinese and other foreign lenders, particularly under the China-Pakistan Economic Corridor (CPEC).
Earlier government data showed Pakistan would need to repay around $28 billion in CPEC-related energy and infrastructure loans by 2038. Many of those loans were taken on commercial terms, with interest rates linked to international benchmarks plus a premium.
In 2024, Pakistani officials held talks with Chinese counterparts to seek longer repayment periods, lower interest rates and currency adjustments to ease pressure on the sector.
What Happens Next
Officials said that given the scale of the debt, no single lender could shoulder the refinancing. Any solution would require a group of development partners and months of technical and political work. For now, discussions remain exploratory. The government is expected to refine its concept internally before returning to development partners with a clearer plan.
