Chinese IPPs debt: Panel formed to negotiate repayment over three years

ISLAMABAD: Ruling out the possibility of any linkages between securing debt rescheduling from Chinese IPPs and obtaining fresh IMF loans, the government has constituted the Power Sector Financing Steering Committee for negotiating a three-year deal for achieving staggered repayments.

Pakistan has initially requested relaxation of five years in repayment to Chinese Independent Power Producers (IPPs) on $15.4 billion debt till 2036. There is an objective for this rescheduling of Chinese IPPs debt as it will provide a breathing space ranging from a 3 to 5 years period and secondly could provide a cushion to the government to reduce the power tariff in the range of Rs 2 to 3 per unit for providing relief to consumers.

“It should be crystal clear there are no linkages between the Chinese IPPs debt and the IMF loan package. These are different standalone issues and Islamabad will deal with them separately,” a top official stated while talking to The News on Friday, adding that there was no condition of the IMF for striking debt restructuring with Chinese IPPs under $7 billion EFF package. The government has constituted the power sector committee under the chairmanship of the Finance minister and comprising three members including Minister for Power Awais Leghari, the secretary Finance and the secretary Power. This government has been mandated to secure latest updates on a weekly basis as it would be a long and complicated process. So far, the government has been exploring possibilities to hire any consultant based in China to pursue this matter on a regular basis. First of all, the government will have to convince the Chinese side at the G2G level. Then the process of Chinese IPPs and their financed banks would have to be renegotiated separately. After passing through such a lengthy and complicated process, the agreement signed with each IPP will have to be changed and both the Pakistani side and the respective IPP will have to sign the new agreement. The total outstanding repayment to Chinese IPPs has been estimated at $15.4 billion till 2036 as Islamabad will have to pay back $2.23 billion in 2024, $2.13 billion in 2025, $2.03 billion in 2026, $1.89 billion in 2027, $1.57 billion in 2028, $1.3 billion in 2029 and $1.01 billion in 2030. After 2030, the Chinese IPPs repayment will start declining and stand at $0.96 billion in 2031, $0.78 billion in 2032, $0.57 billion in 2033, $0.5 billion in 2034, $0.37 billion in 2035 and $0.02 billion in 2036 under the existing arrangement.

Pakistan has now floated an idea to extend the tenure of five years for Chinese IPPs repayments and if agreed by the Chinese side, the schedule will witness repayment in a staggered manner. Pakistan wanted to stagger the outstanding amount of Chinese IPPs and if granted extension of five years, the outstanding liability will go up to $$1.63 billion in 2024, $1.55 billion in 2025, $1.48 billion in 2026, $1.41 billion in 2027, $1.34 billion in 2028, $1.28 billion in 2029, $1.22 billion in 2030, $1.16 billion in 2031, $1.09 billion in 2032, $0.94 billion in 2033, $0.81 billion in 2034, $0.65 billion in 2035, $0.62 billion in 2036, $0.51 billion in 2037, $0.47 billion in 2038, $0.33 billion in 2039, $0.25 billion in 2040 and $0.01 billion in 2041. With this staggering in tenure of repayments, the overall repayment will be increased from $15.4 billion to $16.62 billion with extension of five years from 2036 to 2041.