🔳 DEBTS AND FINANCIAL LIABILITIESPakistan’s power and energy sector carries debts and financial obligations estimated at approximately US$38.81 billion, equivalent to nearly PKR 10.777 trillion.Public Research Series | Episode 45Topic: How Can Pakistan’s Electricity System Be Fixed?Title: How Much Debt and Financial Liability Does Pakistan’s Power and Energy Sector Carry? What Is the Reality?🔺 When institutions are reluctant to provide the facts, the responsibility of establishing the truth falls on the public.Written and Researched by Syed ShayanThis episode examines the debts and financial obligations associated with Pakistan’s power and energy sector across a range of countries. It seeks to clarify the true nature of these amounts, distinguishing formal loans from unpaid liabilities, contractual commitments, potential penalties and legal claims.These obligations do not all belong to the same category. Some are conventional loans. Others are unpaid bills for electricity, oil or gas. A further category consists of contingent liabilities arising from contractual disputes, arbitration proceedings, project delays or other legal and commercial commitments.The episode also considers the debt sustainability of Pakistan’s power and energy sector. In practical terms, the question is whether the country retains a reasonable capacity to meet these obligations or whether the burden has reached a level that should cause serious concern.These debts and liabilities can broadly be divided into three categories.1. LoansThese are funds obtained by Pakistan from foreign governments or financial institutions through loans or financing facilities that have not yet been fully repaid.2. Outstanding PayablesThese are amounts owed for electricity, oil or gas already purchased but not yet paid for.3. Penalties and Contingent LiabilitiesThese are amounts that have either already been imposed or may become payable in the future because of contractual breaches, delays in completing projects, arbitration proceedings or other legal causes.The following country-by-country assessment examines the scale of these obligations, their underlying nature and the extent to which the resulting burden ultimately falls on the national treasury and the public.
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CHINAApproximately US$1.52 billionApproximately PKR 423 billionThis amount relates to outstanding payments owed to Chinese power producers operating under the China Pakistan Economic Corridor, including electricity charges, capacity payments and other contractual obligations.By the end of the 2025-26 financial year, outstanding dues payable to Chinese power companies had reportedly reached approximately PKR 423 billion.
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IRANPotential Penalty: Approximately US$18 billionApproximately PKR 5 trillionHistoric Electricity Dues: Approximately US$51 millionApproximately PKR 14.16 billionThe potential US$18 billion exposure relates to a possible penalty and international arbitration claim arising from Pakistan’s failure to complete the Iran Pakistan Gas Pipeline project.This is not a current payable debt. It is a contingent legal and contractual liability that could arise if the dispute proceeds and an award is enforced. It is entirely separate from Pakistan’s unpaid bills for electricity imported from Iran.Historic Electricity Dues: Approximately US$51 millionApproximately PKR 14.16 billionIn 2013, Pakistan’s unpaid liabilities for electricity imported from Iran were reported at approximately US$51 million.This is an old figure. The current amount may be higher, lower or broadly similar, depending on subsequent payments, adjustments and additional supplies.
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QATARRemaining Contractual Commitment: Approximately US$5.6 billionApproximately PKR 1.56 trillionThis figure is an estimate of Pakistan’s remaining obligation to purchase approximately 177 LNG cargoes from Qatar between 2025 and 2031.It is not an immediately payable debt. It is the estimated value of future purchases under an existing long-term supply agreement.Because domestic gas demand has weakened, Pakistan has sought to defer some LNG cargoes and reopen parts of the contractual schedule with Qatar.In 2024, five Qatari LNG cargoes were reportedly deferred for one year.Total Value of LNG Agreements with Qatar: Approximately US$16 billionApproximately PKR 4.44 trillionThis figure represents the estimated total value of Pakistan’s long-term LNG agreements with Qatar. It should not be treated as a current outstanding liability.The rupee values in this assessment have been calculated at an exchange rate of approximately PKR 277.69 to one US dollar. The exchange rate remained close to this level in July 2026.
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SAUDI ARABIAApproximately US$1.2 billionApproximately PKR 333 billionDeferred Oil Payment FacilityIn February 2025, the Saudi Fund for Development extended a US$1.2 billion financing facility to Pakistan for the import of petroleum products.Under this arrangement, Pakistan was allowed to import approximately US$100 million worth of oil each month on deferred payment terms.The facility concluded in April 2026. It would therefore be misleading to classify the full US$1.2 billion as a current outstanding debt without first establishing how much has already been repaid.Saudi Arabia has also remained an important financial partner in Pakistan’s energy sector through ACWA Power investments and deferred payment arrangements for petroleum imports.
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TÜRKİYEFormer Arbitration Award: Approximately US$846 millionApproximately PKR 235 billionThe Turkish company Karkey Karadeniz entered into an agreement to provide rental power generation capacity to Pakistan.After the project became the subject of a dispute, the company initiated international arbitration proceedings and secured an award of approximately US$846 million against Pakistan.A settlement was reached in 2019, allowing Pakistan to avoid a payment that could have approached US$1 billion.The amount is therefore no longer an outstanding debt or present financial liability. It represents a former contingent exposure that was ultimately resolved.The case remains relevant because it illustrates the risks created by poorly structured contracts and weak institutional oversight. It may also serve as a warning to those responsible for future borrowing and energy procurement policy.
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UNITED ARAB EMIRATESThe United Arab Emirates supplies petroleum products to Pakistan through ADNOC and other Emirati companies.However, as of July 2026, no reliable public information was available identifying a specific amount owed by Pakistan to the UAE in relation to the power or energy sector.For this reason, no definitive figure has been included for the UAE at this stage.
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FRANCEUS$205 millionApproximately PKR 57 billionThe French Development Agency, AFD, provided Pakistan with a concessional loan of €180 million for transmission lines and grid station projects undertaken by the National Transmission and Despatch Company.The projects are intended to strengthen the electricity transmission network in Vehari, Arifwala and Sialkot.
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GERMANYApproximately US$31 millionApproximately PKR 8.6 billionGermany’s state-owned development bank, KfW, provided Pakistan with a loan of approximately €27 million to modernise the country’s electricity transmission system.The financing is intended to support the installation of advanced technology at grid stations operated by the National Grid Company, formerly NTDC, and to improve the reliability, stability and efficiency of the transmission network.In March 2026, KfW also provided an €18 million grant, equivalent to approximately US$20 million, for hydropower and renewable energy projects in northern Pakistan.As this amount is a grant, it has not been included in Pakistan’s repayable debt.The US$31 million figure should not be understood as Germany’s total outstanding energy-sector financing to Pakistan. It relates only to a specific recent project loan.
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JAPANApproximately US$490 millionApproximately PKR 136 billionThis figure represents the combined value of concessional loans provided by the Japan International Cooperation Agency for a range of power and energy projects in Pakistan.The financing supported hydropower development, transmission lines, grid stations, load dispatch systems and other electricity infrastructure.The principal loans are listed below.• Ghazi Barotha Hydropower Project, Phase I: JPY 20.000 billion• Ghazi Barotha Hydropower Project, Phase II: JPY 14.902 billion• Load Dispatch System Upgrade: JPY 3.839 billion• Dadu Khuzdar Transmission System: JPY 3.702 billion• Punjab Transmission Lines and Grid Stations: JPY 11.943 billion• National Transmission Lines and Grid Stations Strengthening: JPY 23.300 billion• Islamabad Burhan Transmission Line, Phase I: JPY 2.665 billionTotal: Approximately JPY 80.351 billionThis is the combined value of loans approved for these projects.Some instalments may already have been repaid. The amount still outstanding may therefore be lower than the total originally approved.🔳 SUMMARY
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Listed Loans, Financing Facilities and Financial Liabilities: Approximately US$3.45 billionThis includes outstanding payments owed to Chinese power producers, the Saudi financing facility, and loans provided by France, Germany and Japan for energy-sector projects.
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Outstanding Payables: Approximately US$51 millionThis relates to historic unpaid dues for electricity imported from Iran. The current amount may differ.
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Remaining Contractual Commitments: Approximately US$5.6 billionThis is the estimated value of Pakistan’s remaining LNG purchase commitments under its agreements with Qatar.
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Potential Penalties and Legal Liabilities: Approximately US$18 billionThis relates to the possible penalty and international arbitration exposure associated with the Iran Pakistan Gas Pipeline project.
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Resolved Financial Liability: Approximately US$846 millionThis refers to the arbitration award secured by the Turkish company Karkey Karadeniz, which ceased to be a financial obligation after the 2019 settlement.🔺 CONCLUSIONBased on the available information, the combined value of Pakistan’s identified debts, financial liabilities and contractual commitments in the power and energy sector is approximately US$9.10 billion.This is equivalent to approximately PKR 2.527 trillion.In addition, the Iran Pakistan Gas Pipeline project carries a separate potential legal and financial exposure of approximately US$18 billion.This is equivalent to approximately PKR 4.998 trillion.It is important to distinguish between the different types of obligations included in these figures.Some are formal loans. Some are unpaid liabilities. Some are future contractual commitments. Others are contingent legal claims that may or may not become payable.It would therefore be inaccurate to describe the entire amount as debt.🔳 FINANCING OF PAKISTAN’S POWER AND ENERGY SECTOR BY INTERNATIONAL FINANCIAL INSTITUTIONS AND DOMESTIC BANKSHaving examined the loans, arrears and contingent liabilities associated with individual countries, we now turn to the institutions that have financed Pakistan’s power and energy projects.This list includes four major international financial institutions:1. World Bank2. Asian Development Bank3. Asian Infrastructure Investment Bank4. Islamic Development BankA fifth major source of financing is a consortium of 18 Pakistani banks, which provided funds to address power-sector circular debt and restructure earlier bank loans.This section examines how much financing these institutions have provided to Pakistan’s power and energy sector, how much of it was extended in the form of loans, and the current status of those loans and related liabilities.It is important to distinguish between financing approved for a project and the amount of debt that remains outstanding. Part of an approved facility may not yet have been disbursed, while some instalments of a disbursed loan may already have been repaid. The actual outstanding balance can therefore only be determined by separately examining the amount disbursed, repayments made, interest accrued and liabilities still payable.
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WORLD BANKApproved Power-Sector Financing: Approximately US$4 billionApproximately PKR 1.112 trillionThe World Bank has financed a broad range of projects in Pakistan involving hydropower, the national grid, electricity transmission, distribution companies, renewable energy and wider improvements to the power system.These projects include the Dasu Hydropower Project, extensions to the Tarbela Hydropower Project, electricity distribution improvement programmes, modernisation of the national transmission system, renewable energy projects in Khyber Pakhtunkhwa and the US$375.9 million Grid Stability Enhancement Project.
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ASIAN DEVELOPMENT BANKOngoing Energy-Sector Financing: Approximately US$2.4 billionApproximately PKR 667 billionThis financing covers electricity transmission, grid modernisation, renewable energy, distribution infrastructure and broader power-sector reforms.
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ASIAN INFRASTRUCTURE INVESTMENT BANKTotal Approved Financing: Approximately US$550 millionApproximately PKR 153 billionThis includes US$300 million for the Tarbela 5th Extension Hydropower Project and US$250 million for the Balakot Hydropower Project.Both projects are being financed jointly with other international financial institutions.
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ISLAMIC DEVELOPMENT BANKTotal Financing: Approximately US$335 millionApproximately PKR 93 billionThis includes US$180 million for the Mohmand Dam and Hydropower Project and US$155 million in financing linked to the CASA-1000 electricity transmission project.The Islamic Development Bank’s cumulative historical investment in Pakistan’s energy sector has been estimated at approximately US$9.3 billion. This amount, however, does not represent the debt currently outstanding. It includes financing for a range of completed and ongoing projects undertaken over different periods.It should also be clarified that the International Monetary Fund has not provided Pakistan with a separate loan for any specific power-sector project. IMF financing is intended to support the country’s broader macroeconomic and foreign-exchange requirements.IMF programmes do, however, impose conditions relating to electricity tariffs, subsidies, circular debt, capacity payments and wider power-sector reforms.The power sector’s circular debt of approximately US$6.35 billionApproximately PKR 1.764 trillionis not an IMF loan. It consists of interrelated liabilities among government entities, power companies, banks and electricity producers within Pakistan.🔳 SUMMARY🔘 Major Approved and Ongoing Financing by Four International Financial Institutions: Approximately US$7.3 billionApproximately PKR 2.027 trillion🔘 Power-Sector Lending and Debt Restructuring by the Consortium of 18 Pakistani Banks: Approximately US$4.41 billionApproximately PKR 1.225 trillion🔘🔘 Combined Volume of International Institutional Financing and Domestic Bank Lending: Approximately US$11.71 billionApproximately PKR 3.252 trillion
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CONSOLIDATED POSITIONThe combined value of loans, arrears and financial obligations associated with individual countries is approximately US$9.10 billion, while financing provided by international financial institutions and Pakistani banks amounts to approximately US$11.71 billion.Together, these amounts bring the total to approximately US$20.81 billionApproximately PKR 5.779 trillionIf the potential US$18 billion penalty associated with the Iran Pakistan Gas Pipeline is also included, the overall amount rises to approximately US$38.81 billionApproximately PKR 10.777 trillionPakistan may face this liability if the Iran Pakistan Gas Pipeline dispute is not resolved through negotiations or a legal settlement.The US$846 million arbitration award involving the Turkish company Karkey Karadeniz was settled and is therefore not included in this total.⭕️ FINAL ASSESSMENTPakistan’s current and potential future financial obligations associated with the power and energy sector amount to approximately US$38.81 billion, equivalent to nearly PKR 10.777 trillion.
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At the beginning of this episode, we asked whether the debt sustainability of Pakistan’s power and energy sector was manageable or had become a serious cause for concern.The available figures indicate that the sector’s current and potential financial obligations stand at approximately US$38.81 billion, or nearly PKR 10.777 trillion. Even this figure is not comprehensive. It represents only the major obligations for which reliable public estimates are available.A financial burden of this scale in a single sector is clearly a matter of serious concern. Repayment of earlier financing is already being recovered from electricity consumers through a 3.6 per cent surcharge on their bills. The critical question is where the funds required to meet future obligations will come from and who will ultimately be made to bear the cost.This issue cannot remain confined to government departments, financial institutions and technical experts. Pakistan’s educated public and civil society must also engage with it seriously and demand greater transparency, accountability and informed public debate.[To be continued in the next episode.]
