Islamabad (TDI): Pakistan has approached the Asian Development Bank (ADB) for substantial additional financing to help retire the remaining Rs1.7 trillion circular debt in the power sector and to refinance a portion of recently secured Rs1.25 trillion in commercial borrowing on longer and more affordable terms.
The move is aimed at easing pressure on electricity tariffs, improving grid stability and encouraging growth in power demand. The request was conveyed on Wednesday by Federal Minister for Power Sardar Awais Leghari during talks with an ADB delegation led by Leah Gutierrez, Director General for Central and West Asia. While no specific loan amount was discussed at the meeting, the proposal sets the stage for detailed negotiations, according to Dawn.
Pakistan’s outstanding debt to the ADB currently stands at around $17 billion, making it the country’s third-largest creditor after China and the World Bank.
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Sources familiar with the discussions said the minister urged the Manila-based lender to develop financing structures that could reduce the cost of power sector debt by extending repayment periods and offering lower interest rates compared to market-based commercial loans. Such arrangements, officials believe, would make debt servicing more manageable without relying on direct budgetary support, the paper added.
By shifting to cheaper and longer-term financing, the government hopes to service power sector liabilities through electricity tariffs at reduced rates. Officials argue that this would help revive electricity consumption, which has remained sluggish for years due to high tariffs, while also addressing grid instability caused by declining demand and the rapid expansion of off-grid solar power.
The government recently borrowed about Rs1.25 trillion from domestic commercial banks at Kibor minus 0.9 per cent to refinance earlier liabilities. However, with the central bank’s policy rate now on a downward trend, authorities are seeking more favourable refinancing options. The existing loan is being recovered from consumers through a permanent surcharge of Rs3.23 per unit for debt servicing. During the meeting, Pakistan also sought ADB support for expanding smart metering across power distribution companies.
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In addition, the minister highlighted Pakistan’s role in reducing carbon emissions through widespread adoption of solar energy, while noting that the transition has posed technical challenges for grid stability. The government team argued that a combination of concessional debt swaps, investment in smart metering and recognition of Pakistan’s environmental contributions could help lower average electricity costs and stabilise the power system through better technology and increased on-grid demand.
