$16bn Debt Reprofiling Pacts for CPEC Projects Finalized by Pakistan
Pakistan and China are prepared to sign agreements for reprofiling over $16 billion of debts during Chinese Prime Minister Li Qiang's visit. The deal, which involves a five-year debt reprofiling and a three-year payment moratorium, will help reduce electricity costs in Pakistan, especially for projects under the China-Pakistan Economic Corridor (CPEC).
This agreement covers nine power generation projects and a transmission line, helping the Pakistani government rationalize consumer tariffs, which have risen significantly in recent years. The deal will ensure a win-win arrangement for both sides, allowing Pakistan to stabilize its energy sector.
Pakistani Ministers of Energy and Finance visited China in July 2024 to discuss the terms with Chinese authorities. A task force, supported by China International Capital Corporation (CICC) and Habib Bank Limited (HBL), was formed to finalize the terms of the debt reprofiling.
The final Memoranda of Understanding (MoUs) have been drafted and reviewed by the relevant government divisions. They await Federal Government approval for signing during the high-level visit in October 2024. The new loan repayment schedule will extend from 2036 to 2041, increasing the total repayment from $15.4 billion to $16.62 billion.
The MoU outlines steps to restructure foreign currency loans, extend loan tenure by five years, and implement a three-year principal payment moratorium.