Pakistan is pursuing low-interest financing to repay costly CPEC-related energy debt, aiming to ease circular debt pressures and reduce electricity tariffs for consumers.
Pakistan is seeking approximately $10 billion in low-cost financing as part of a long-term strategy to tackle mounting energy-sector debt and lower electricity prices for consumers.
The government is exploring concessional loans from bilateral partners to refinance expensive liabilities linked to Chinese power projects developed under the China-Pakistan Economic Corridor (CPEC). Officials say the move would help settle outstanding payments to Chinese energy companies while easing financial pressure on the country’s power sector.
Outstanding dues to CPEC power plants have climbed to nearly Rs423 billion, largely due to unresolved late payment surcharge disputes. These liabilities have contributed significantly to Pakistan’s growing circular debt, increasing the overall cost of electricity generation.
Under the proposed plan, Pakistan aims to secure financing at an interest rate of around 1%, replacing high-cost energy debt with more affordable borrowing. The government plans to obtain annual financing of between $1.1 billion and $1.4 billion from 2027 through 2034. Repayment would begin after a three-year grace period and continue over a 15-year period.
According to the Power Division, debt servicing remains a major driver of high electricity tariffs, with fixed financial obligations accounting for a substantial share of consumer bills. Officials believe refinancing expensive debt could improve the financial health of the power sector while creating room for lower electricity prices.
Negotiations with Chinese power producers over late payment surcharge waivers are ongoing as the government continues efforts to reduce circular debt and strengthen the country’s energy finances.
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