Pakistan has approached the World Bank to explore its potential role in refinancing nearly $36 billion worth of energy sector debt that was accumulated over the years to install power generation projects across the country. Government sources indicate that the initiative is part of broader efforts to reduce the financial burden of expensive foreign loans and ultimately bring down electricity prices for consumers.
According to officials familiar with the discussions, a preliminary proposal has been developed that seeks to replace high-cost commercial and bilateral borrowing with relatively cheaper, long-tenure multilateral financing. The primary objective is to lower the cost of debt servicing, which is currently embedded in electricity tariffs and passed on directly to consumers in the form of higher power bills. This includes not only principal repayments but also interest costs and returns to project sponsors.
Sources told The Express Tribune that the government has already held meetings with the World Bank and conducted inter-ministerial consultations to assess the feasibility of such a refinancing plan. A spokesperson for the World Bank confirmed that during a recent meeting, Pakistan’s power minister highlighted the scale of the $36 billion energy sector debt and inquired whether development partners could collectively support a refinancing effort.
Given the size of the proposed refinancing, officials acknowledged that no single lender would be able to provide the full amount. Instead, the government is exploring a structure under which multiple multilateral and bilateral creditors could contribute over time. Under one scenario discussed internally, development partners could collectively provide between $1 billion and $2 billion annually to help Pakistan meet maturing debt obligations.
The initial proposal under consideration reportedly seeks concessional financing with a repayment period of around 15 years, including a grace period of approximately four years. The government believes that securing such terms could significantly reduce the overall cost of electricity generation and transmission, allowing tariffs to be lowered to an estimated 8–9 cents per unit, or roughly Rs25 per unit.
While electricity prices for industrial consumers were recently reduced to around Rs23 per unit, officials note that the effective billed cost remains above Rs26 per unit. Residential consumers, meanwhile, continue to face tariffs exceeding Rs57 per unit, a level widely regarded as unsustainable. High power costs have already pushed many households toward rooftop solar solutions, reducing demand from the national grid and adding further strain to the power sector’s financial viability.
Power Minister Awais Leghari recently met with World Bank Country Director Bolormaa Amgaabazar to discuss the issue. The World Bank confirmed the meeting, stating that the government had shared its intention to restructure the heavy debt burden of the power sector. However, the lender noted that the proposal remains at an early stage and that further details are required before any concrete assessment can be made. The World Bank also clarified that while it could share global experiences to help Pakistan design an effective financing mechanism, no discussion on direct financial support has yet taken place.
Despite these discussions, the Power Division has publicly downplayed reports of an active refinancing proposal. A spokesperson said that while multiple reform ideas are under internal consideration to ease pressure on consumers and stimulate demand, no formal plan involving debt reprofiling or refinancing is currently under discussion. The spokesperson added that the division’s focus remains on long-term sustainability, efficiency improvements, and engagement with international financial institutions on green and climate-aligned financing.
Pakistan’s power sector debt has accumulated largely over the past decade, with many projects financed through Chinese institutions under the China-Pakistan Economic Corridor. Government data shared with the IMF previously indicated that Pakistan would need to repay around $28 billion to China for CPEC energy and infrastructure projects by 2038. Many of these loans were taken at relatively high interest rates, linked to Libor plus margins of around 4.5 percent.
In recent years, Pakistani officials have also engaged Chinese authorities to seek relief through restructuring measures, including extending repayment tenures, reducing interest rates, and shifting dollar-based obligations into Chinese currency. These efforts reflect the government’s broader strategy to address rising energy costs, stabilize the power sector, and protect consumers from persistently high electricity tariffs.
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