Pakistan has requested the re-profiling of over $27 billion in debt and liabilities with friendly nations—China, Saudi Arabia, and the UAE—to secure a 37-month IMF bailout package and alleviate foreign exchange outflows and consumer tariffs in the energy sector.
Finance Minister Muhammad Aurangzeb announced on Sunday that Islamabad has asked these three bilateral lenders to extend the maturity of its over $12 billion annual debt portfolio by three to five years to obtain IMF board approval for a $7 billion economic bailout next month.
Additionally, Pakistan has requested China to convert coal-based projects to local coal and re-profile over $15 billion in energy sector liabilities to create fiscal space amid repayment challenges.
Pakistan has an ongoing financial arrangement with these countries involving commercial loans and SAFE deposits that are rolled over annually, forming a significant part of the IMF programme’s external financing needs.
The country has requested extensions for these loans—$5 billion from China, $4 billion from Saudi Arabia, and $3 billion from the UAE—to at least three years, aiming for greater predictability under the IMF programme.
Speaking after returning from China, Aurangzeb noted that China recognized Pakistan’s foreign exchange difficulties and expressed willingness to assist with new business ventures and energy sector re-profiling. China also promised to support Pakistan’s case at the IMF board as a major stakeholder.
Aurangzeb stated that the debt and equity rescheduling process had begun and would proceed with working groups, relevant financial institutions, and sponsors of Chinese projects. Pakistan is hiring local Chinese consultants for this purpose. He emphasized the need to confirm external financing from friendly bilateral partners before the IMF board meeting, though he clarified that the Chinese energy sector debt re-profiling is separate from the IMF programme, as prior actions and structural benchmarks are already being implemented.
Aurangzeb assured that Pakistan is in a strong position regarding external financing for the next three years, including the first three years of the IMF programme. He emphasized that no incremental financing is being sought, only an extension in maturity periods instead of annual rollovers.
The minister also discussed the issue of energy sector repayments, which was initially raised by Prime Minister Shehbaz Sharif with President Xi Jinping during a Beijing visit and followed up with formal letters to Prime Minister Li Keqiang.
Aurangzeb, along with Power Minister Awais Leghari, held discussions with Chinese finance and energy ministers and the governor of the Chinese central bank to address Pakistan’s payment capacity, economic stability, and relief in energy tariffs. They discussed converting Chinese power projects to local coal and moving forward with technical, logistical, and financial parameters. Financial re-profiling discussions will continue with banks and project sponsors on a case-by-case basis, particularly for CPEC-related debt.
The minister clarified that Pakistan seeks re-profiling rather than “haircuts,” meaning no debt waivers or interest rate cuts. He stressed the need for long-term structural solutions to economic challenges and acknowledged the difficulties faced by society due to high interest rates, energy prices, currency devaluation, and increased taxes.
Aurangzeb highlighted ongoing efforts with both the US and China, aiming to advance phase two of CPEC, which involves relocating Chinese businesses to Pakistan. He noted the US as Pakistan’s largest trading partner and the European Union’s GSP+ status as a boost to exports.
During his visit to China, Aurangzeb also explored opportunities in the Chinese capital market through Panda bonds. Pakistan plans to register for $1 billion worth of Panda bonds but will initially tap $150-200 million.
He advised industrialists to recognize that Pakistan’s economy faces immediate foreign exchange crises when pursuing rapid growth and cautioned against reverting to import restrictions, which could be more painful. Aurangzeb hopes that stability in foreign exchange and macroeconomic indicators will improve Pakistan’s credit rating, foster export-led growth, and facilitate a return to international capital markets.
The minister noted that past attempts at public sector rightsizing were unsuccessful due to large portfolios. He is now advocating for “bite-size” restructuring, starting with five ministries—Kashmir Affairs and Gilgit-Baltistan, Safron, Industries and Production, IT and Telecom, and Health—while ensuring workers’ rights and asset values are protected.