$36bn loans for power sector: govt in talks with Saudi and financial institutions

ISLAMABAD: The government is in discussions with International Financial Institutions (IFIs) and Saudi Arabia to secure loans worth USD36 billion over 13 years starting FY27 to refinance the power sector’s debt servicing burden, a move aimed at reducing electricity tariffs, particularly for industry, well-informed sources told Business Recorder.

According to sources, the proposed interest rate under discussion with IFIs, including the World Bank and Asian Development Bank (ADB), is around 2 per cent, while financing from Saudi Arabia is being explored at a lower rate of 1 per cent.

The Power Division has already presented its refinancing proposals to the ADB and World Bank during meetings held in recent months.

READ MORE: IMF urges Pakistan to cut power sector circular debt

Under the proposed plan, refinancing requirements would be spread over thirteen years as follows:

According to the proposed amount of refinancing will be as follows; (i) USD 4.40 billion in FY 27; (ii) USD 4.18 billion FY 28; (iii) USD 4.44 billion FY 29; (iv) USD 3.97 billion FY 30; (v) USD 3.19 billion FY 31; (vi) USD3.22 billion FY 32; (vii) USD 2.91 billion FY 33; (viii) USD 2.52 billion FY 34; (ix) USD 2.22 billion FY 35; (x) USD 1.40 billion FY 36; (xi) USD 1.36 billion FY 37; (xii) USD 1.28 billion FY 38 and; (xiii) USD1.21 billion FY 39.

Currently, the power sector’s circular debt is around Rs 1.8 trillion but the government is determined to contain it at Rs 1.6 trillion up to June 30, 2026.

The government recently raised Rs 1.225 trillion from commercial banks to reduce the circular debt and also decided to continue recovery of Debt Service Charge at Rs 3.23/kWh for the next six years to bring it to zero. If borrowing is arranged from IFIs at 2 per cent, industrial tariff will be reduced to 8.70 Cents in FY 27, 8.48 Cents/kWh FY 28, 8.23 Cents/kWh FY 29, 8.34 Cents/kWh FY 30, 8.66 Cents/kWh FY 31, 8.56 Cents/kWh FY 32, 8.72 Cent/kWh FY 33, 9.08 Cents/kWh FY 34, 9.18 Cents/kWh 35, 9.59 Cents/kWh FY 36, 9.46 Cents/kWh FY 37, 9.34 Cents/kWh FY 38 and 9.18 Cents/kWh 39.

However, if the loan is arranged from KSA at 1 per cent interest, industry’s revised tariff will be 8.62 Cents/kWh in FY 27, 8.34 Cents FY 28, 8.02 Cents FY 29, 8.12 Cents, 30, 8.45 Cents FY 31, 8.35 Cents FY 32, 8.52 Cents FY 33, 8.88 Cents FY 34, 8.99 Cents FY 35, 9.42 Cents FY 36, 9.30 Cents FY 37, 9.18 Cents FY 38 and 9.03 Cents/kWh FY 39.

Copyright Business Recorder, 2026