Finance Minister Muhammad Aurangzeb has said Pakistan was getting an “encouraging” response from China over its request to reprofile power sector debt.
“We have just started that discussion and the response is encouraging,” the finance minister told Bloomberg on the sidelines of the annual meetings of the International Monetary Fund (IMF) and World Bank. “These are early days in terms of those negotiations”.
“We’ve had so many programmes. We’ve had boom and bust cycles,” he said. “We do not have a choice but to ensure that we continue with the structural reforms.”
According to the report, this signalled “potentially more breathing room” for the country as it looked towards “increasing maturities for debt taken to build power plants and create space to lower electricity prices”.
In July, it was reported that the finance minister was engaged with Chinese officials over reprofiling power sector debt alongside structural reforms suggested by the IMF.
The government and the IMF agreed on the 37-month loan programme in July which, according to the Fund, was subject to obtaining “timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners”.
According to the report, China has currently rolled over debt of $16 billion from a total of $26bn in the current fiscal year started in July.
Aurangzeb also said that the government also plans to initiate discussions on obtaining additional financing from the IMF through its climate resiliency fund.
However, the report stated that the “Chinese embassy in the US declined to say whether Beijing gave a positive response to the Pakistani request to extend loan maturities when reached for comment”, adding that the spokesperson said China “supported Pakistan in growing the economy, improving people’s livelihood and maintaining financial stability”.
Furthermore, Aurangzeb said that the government knows it has no business being in business and that it must provide an enabling environment to support the private sector.
“It also aims to shrink government costs by cutting the number of ministries and closing 150,000 federal positions,” the report quoted Aurangzeb as saying.
The country is “seeking to extend the maturity of debt for nine power plants built by Chinese companies under the multibillion-dollar economic corridor”, Bloomberg noted.
Taxation of agri, retail sectors
To boost tax revenue, Aurangzeb said the country aimed to start collecting tax from sectors such as retail and agriculture, which have opposed previous attempts at taxation, by July 2025.
Provincial governments are to move forward on legislation on the agricultural side by January, the finance minister said in the interview.
On the monetary policy side, the finance minister commented that the State Bank of Pakistan (SBP) may reduce the policy rate in the next Monetary Policy Committee (MPC) meeting due on November 4.
In September, the central bank decided to cut its key policy rate by 200 basis points to 17.5pc from the previous 19.5pc on the back of improved inflation numbers, which were recorded at a 44-month low of 6.9pc owing to a steady decline in global commodity prices, an increase in domestic agricultural production and a stable currency rate.
