In the coming weeks, Pakistan aims to persuade Chinese-owned independent power producers (IPPs) in the country to switch from using imported coal to coal sourced locally from the Thar region. This move is part of discussions during a visit to Beijing, where talks will also include restructuring Pakistan’s energy sector debt, according to Awais Leghari, head of the energy ministry’s Power Division, speaking to Reuters.
The International Monetary Fund (IMF) recently approved a $7 billion bailout for Pakistan, prompting discussions on structural reforms in the power sector. China has invested over $20 billion in energy projects in Pakistan, and converting IPPs to local coal usage could ease pressure on Pakistan’s foreign exchange reserves and enhance returns for Chinese investors.
Leghari emphasized that transitioning to local coal could save Pakistan around Rs 200 billion ($700 million) annually in import costs, potentially reducing electricity prices significantly. He highlighted ongoing efforts to address Pakistan’s energy sector challenges, including high rates of power theft and distribution losses, which contribute to mounting circular debt—accumulated liabilities due to subsidies and unpaid bills.
The government’s reform agenda aims to reduce circular debt by Rs 100 billion ($360 million) each year. Details on debt restructuring talks with China were not disclosed, but the discussions are crucial as Pakistan seeks to stabilize its power sector amid financial constraints and leverage its indigenous coal reserves.
