ISLAMABAD: Finance Minister Muhammad Aurangzeb arrived in Beijing on Thursday for talks on power sector debt relief alongside structural reforms suggested by the International Monetary Fund, two government sources said.
He held a meeting with his Chinese counterpart, they said, and is leading a delegation, along with Power Minister Awais Leghari, that will discuss several proposals, including reprofiling nearly $15 billion in energy sector debt.
As the meeting progressed, Pakistan’s bonds slid lower, with the 2036 maturity down 1.73 cents to bid at 73.05 cents on the dollar by 1415 GMT, according to Tradeweb data, its lowest since April.
The countries, which share a border, have been longtime allies, and rollovers or disbursements on loans from China have helped Pakistan meet its external financing needs in the past.
The IMF this month agreed on a $7 billion bailout for the heavily indebted South Asian economy, while raising concerns over high rates of power theft and distribution losses that result in debt accumulating across the production chain.
The government is implementing structural reforms to reduce “circular debt” — public liabilities that build up in the power sector due to subsidies and unpaid bills — by 100 billion Pakistani rupees ($360m) a year, Leghari has said.
On Thursday he said on X that he and the finance minister had briefed Chinese Minister of Finance Lan Fo’an on Pakistan’s “efforts to introduce tax and energy reforms in the system”.
A statement from Pakistan’s finance ministry said that Aurangzeb informed the Chinese side about the economic reform agenda, efforts to strengthen tax revenue generation, and energy and state-owned enterprise reform. He described the deal between the IMF and Pakistan as an important enabler to execute the reform agenda, it added.
The Chinese finance ministry did not respond to requests for comment.
Both the finance and power ministers told Reuters in interviews last week that they would be discussing the power sector reforms in their Beijing visit, though they did not specify the timing.
Poor and middle-class households have been affected by a previous IMF bailout reached last year, which included raising power tariffs as part of the funding programme that ended in April.
China has set up over $20bn worth of planned energy projects in Pakistan.
Published in Dawn, July 26th, 2024
