A memorandum of understanding (MoU) is expected to be signed soon, paving the way for the restructuring of $15.4 billion in debt tied to power projects under the China-Pakistan Economic Corridor (CPEC), sources revealed on Tuesday. The agreement is anticipated during the upcoming visit of Chinese Prime Minister Li Qiang to Pakistan.
Pakistan has proposed the restructuring of loans for these power projects, which could add approximately $1.22 billion to the country’s repayment obligations. If the repayment period is extended by five years, the total repayment would increase from $15.4 billion to $16.62 billion.
Prime Minister Li Qiang is scheduled to visit Pakistan this month to attend the Shanghai Cooperation Organisation (SCO) meeting for heads of government, which will take place on October 16. Pakistan is hosting the event, which includes a ministerial gathering and rounds of senior officials’ meetings focused on cooperation in finance, economics, socio-cultural, and humanitarian areas among SCO member states.
The expected visit and agreements underscore the deepening financial collaboration between Pakistan and China, particularly in the energy sector, as both nations work to address economic challenges and advance projects under CPEC.
According to sources, Pakistan’s Private Power Infrastructure Board and Chinese companies are set to sign the MoU concerning the restructuring of debt. Approval for the agreement, which includes a proposal to defer payments to China for up to three years, will be sought from Pakistan’s federal cabinet.
As reported by Business Recorder, both Pakistani and Chinese power companies are close to finalizing deals related to debt restructuring and a payment moratorium, extending over $16 billion for a period of three to five years.
Pakistan’s power sector has been burdened by high levels of theft and distribution losses, leading to growing debts across the energy production chain—a concern highlighted by the International Monetary Fund (IMF). In response, the government has been implementing structural reforms aimed at reducing circular debt, the public liabilities accumulating due to subsidies and unpaid bills. Energy Minister Awais Leghari earlier mentioned plans to lower this debt by Rs100 billion ($360 million) annually.
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