Pakistan begs China for power debt forgiveness

Pakistan’s debt problems are escalating as liabilities due on China-funded energy projects established under the China-Pakistan Economic Corridor (CPEC) surpass $31 billion and Beijing declines to restructure $3 billion in liabilities coming due that Islamabad possibly won’t pay. The debt load, owed largely for the building of independent power producers (IPPs) on take-or-pay power generation contracts, is substantially more than the $19 billion in total invested in the plants, according to reports and industry analysts.

Pakistan is obliged to pay $5.9 billion to the power companies for take-or-pay capacity payments alone over the next four years by 2025. Those will entail more pay than take at current power usage rates. The money is owed despite the fact many of the plants are not actually producing power due to overcapacity and the failure of Pakistani power authorities to develop the national grid and related delivery systems to fully meet grassroots demand.

The contracts and their now perceived as onerous conditionalities were made at a time Pakistan faced acute power shortages.

Read more