PM writes letter to China for debt reprofiling for IMF bailout package

Islamabad: Prime Minister Shehbaz Sharif announced on Friday that he has written to the Chinese government, requesting debt reprofiling for Pakistan.

The move aims to secure the International Monetary Fund’s (IMF) approval for a $7 billion economic bailout by next month.

 “I have written a letter to China, it’s a matter of public domain now, for [debt] reprofiling,” PM Shehbaz stated during a federal cabinet meeting before today's National Assembly session.

Debt reprofiling, as defined by the World Bank, involves modifying the schedule of future repayments through refinancing, debt substitution, or renegotiations. This can assist a country facing multiple loan maturities or currency composition issues and mitigate currency risk, which often exacerbates debt sustainability problems.

PM Shehbaz informed the cabinet that Chinese President Xi Jinping had shown strong interest in the idea of using local coal to reduce imports. “I told the president that Thar coal could help the country cut down on imports and save $1 billion in foreign exchange,” he added.

Finance Minister Muhammad Aurangzeb recently had successful meetings in China, focusing on implementing structural reforms to reduce circular debt. PM Shehbaz emphasized the government's efforts to provide relief to industrial and household consumers, saying that, “This is the joint voice of all parties and the nation.”

He also praised the strong ties with China, recalling that “nobody was ready to invest in our energy sector at the time, but China stepped in and began CPEC.”

 He credited former Prime Minister Nawaz Sharif’s government for signing the infrastructure agreements.

Regarding medium-term measures, the Prime Minister highlighted the need to address loans and capacity charges.

The reports last week confirmed that Pakistan has sought to reprofile over $27 billion in debt and liabilities with friendly nations, including China, Saudi Arabia, and the UAE, to obtain a 37-month IMF bailout package. The  request is intended to alleviate foreign exchange outflows in the energy sector and reduce consumer tariffs.

Besides it, Pakistan asked Beijing to convert imported coal-based projects to local coal and reprofile over $15 billion in energy sector liabilities to create fiscal space amid challenges in timely repayments.

Moreover, PM Shehbaz, according to the reports, informed a high-level Chinese delegation that the federal cabinet has decided to exempt Chinese citizens from visa fees starting August 14.