By Staff Reporter
Pakistan is seeking fresh financing from the Asian Development Bank to clear out the remaining Rs1.7 trillion in circular debt plaguing its power sector and to refinance Rs1.25 trillion in recent commercial borrowings, aiming to secure longer tenors and cut costs in a bid to ease electricity tariffs and bolster grid reliability.
The request came during a meeting in Islamabad on Wednesday between Power Minister Sardar Awais Leghari and a visiting ADB delegation headed by Leah Gutierrez, director general for the Central and West Asia department, according to people familiar with the matter and an official statement.
While Leghari didn’t specify the loan size, leaving that for future talks, the pitch underscores Islamabad’s push for multilateral support to overhaul a sector hobbled by high debt-servicing burdens and stagnant demand. The Manila-based lender’s exposure to Pakistan already totals $17 billion, ranking it third among creditors behind China and the World Bank.
Officials said Leghari urged the ADB to roll out financing tools that would extend repayment periods and offer interest rates below market levels, allowing the government to sidestep direct budget outlays. Instead, repayments could flow through tariffs set lower than current ones, potentially reviving power consumption that’s been stymied by steep prices and a surge in solar adoption, which has strained grid stability and utility finances.
The government recently tapped local banks for about Rs1.25 trillion at a rate of Kibor minus 0.9 percentage points to roll over prior obligations, even as the central bank’s policy rate has eased and further cuts are anticipated. That borrowing is being serviced via a permanent Rs3.23 per unit surcharge on consumers.
The Pakistani side also pressed for ADB funds to scale up smart metering across distribution companies, part of a broader effort to enhance efficiency. Leghari made a case for ramped-up external aid to back Pakistan’s solar push, which is curbing carbon emissions but complicating grid management. Combining debt swaps at favourable terms, smart-meter investments and recognition of environmental contributions could slash average power rates and stabilise the system via tech upgrades and renewed demand for grid-supplied electricity, the government team argued.
An official statement said Leghari “sought ADB’s support in addressing power sector debt repayment challenges, and in building confidence among private investors” as he outlined key hurdles. “He highlighted constraints in financing, issues related to rupee cover, and high upfront costs,” it added, noting efforts to draw local investors through the Pakistan Business Council to boost private funding in transmission and enhance market transparency.
Under the Indicative Generation Capacity Expansion Plan, excess unneeded capacity has been scrubbed, and the government won’t add more procurement as it shifts to a competitive electricity market, Leghari told the delegation. Pakistan has shifted roughly 20 gigawatts to clean energy, he said. “However, despite this significant transition, no dedicated financing was provided for the clean energy shift, nor was funding made available to ensure grid stability,” the statement quoted him as saying, emphasising that the renewable pivot pressed on amid those gaps.
He stressed that “serious and coordinated efforts, supported by adequate financing, were now required to keep the grid stable.” The ADB group was updated on the new Energy Surplus Package designed to spur demand and lift private-sector offtake.” He requested ADB’s support on the financing side, particularly in addressing debt repayment challenges, and in building confidence among private investors,” the statement said. Leghari pledged that a feasibility report targeting private players would be released shortly. Additionally, the government is eyeing smart-meter deployment via public-private partnerships, prioritising tech integration for better performance, he shared.
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