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IFC, other lenders urge Pakistan to rethink move to renegotiate power contracts

IFC, other lenders urge Pakistan to rethink move to renegotiate power contracts
Technicians are silhouetted as they fix cables on a power transmission line in Karachi, Pakistan, on January 9, 2017. (REUTERS/File)
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Updated 25 February 2025

IFC, other lenders urge Pakistan to rethink move to renegotiate power contracts

IFC, other lenders urge Pakistan to rethink move to renegotiate power contracts
  • Development finance institutions say contracts with independent power producers cannot be revised without lender approval
  • Pakistan is working to revise agreements with 14 IPPs to lower electricity tariffs and save approximately $5 billion to national exchequer

KARACHI: The International Finance Corp. and other global financial institutions have urged the Pakistan government to rethink its move to renegotiate power purchase agreements (PPAs) with wind and solar energy producers, saying contracts with independent power producers (IPPs) cannot be amended without prior lender approval, according to a letter seen by Arab News on Tuesday. 

Last month, the Pakistani cabinet approved revisions to agreements with 14 IPPs to lower electricity tariffs for households and businesses and save approximately Rs1.4 trillion ($5 billion) for the national exchequer. 

About a decade ago, Pakistan approved dozens of private projects by IPPs, financed mostly by foreign lenders, to tackle chronic shortages. But the deals, featuring incentives such as high guaranteed returns and commitments to pay even for unused power, resulted in excess capacity after a sustained economic crisis reduced consumption. Short of funds, the government had built those fixed costs and capacity payments into consumer bills, sparking protests by domestic users, industry bodies and political parties. 

The need to revisit the deals was an issue in talks for a critical staff-level pact with the International Monetary Fund (IMF) for a $7-billion bailout approved last year. 

In a letter signed by eight development finance institutions (DFIs) and addressed to the Pakistani ministries of finance and energy, the lenders have raised concern about the “non-consultative” nature of the contract renegotiation process and warned that it could undermine investor confidence.

“We... wish to emphasize that under the terms of their financing and investment agreements, the IPPs we have financed are not permitted to agree to changes to any major project document, including the PPA, without prior written approval from the lenders,” the letter, dated Feb. 18 and signed by agencies such as the World Bank’s International Finance Corporation (IFC), the Islamic Development Bank (IDB) and the Asian Development Bank (ADB), said. 

The letter acknowledged the challenges faced by Pakistan’s power sector and commended certain government measures aimed at addressing long-term structural issues.

However, it cautioned that “renegotiating PPAs in a non-consultative manner will be detrimental to the long-term development of the sector,” potentially eroding investor confidence and deterring essential future private investment.

The DFIs said they had collectively invested $2.7 billion in Pakistan over the past 25 years to support the development of the country’s power sector and create a conducive environment for private sector investment. 

“We hope the Government will reconsider its approach to PPA renegotiations and work to find alternative ways of solving the energy sector’s structural challenges,” the letter concluded. 

The letter comes after a visit to Pakistan by IFC Chief Makhtar Diop during which he said the organization aimed to invest $2 billion in the country annually over the next decade to support private sector growth.

Last October, Pakistan’s energy ministry said it had ended power purchase contracts with five private companies, including one with the country’s largest utility, Hub Power Company Ltd, that should have been in place until 2027, to cut costs.


Pakistan tells OIC conference Israeli military actions driving Middle East instability

Pakistan tells OIC conference Israeli military actions driving Middle East instability
Updated 19 sec ago

Pakistan tells OIC conference Israeli military actions driving Middle East instability

Pakistan tells OIC conference Israeli military actions driving Middle East instability
  • Ishaq Dar tells Istanbul conference Israeli strike on Iran ‘not an isolated event,’ reflects ‘continued impunity’
  • He calls on the OIC to play its role in shaping a more just and stable global order for the Muslim world

ISLAMABAD: Pakistan on Saturday voiced alarm over escalating tensions in the Middle East, blaming Israel’s military actions in Gaza and recent strikes in Iran for deepening instability and humanitarian crisis in the region.

Addressing the 51st session of the Organization of Islamic Cooperation (OIC) Council of Foreign Ministers in Istanbul, Deputy Prime Minister Ishaq Dar reiterated his country’s condemnation of Israel’s attack on Iran.

The high-level conference comes at a moment of crisis for several OIC member states. Two of the bloc’s key countries — Pakistan and Iran — have recently experienced military escalations with regional rivals.

While Pakistan’s brief but intense standoff with India ended in a ceasefire last month, Israel’s strikes on Iranian nuclear and military facilities, launched more than a week ago, have shown no signs of de-escalation.

“Israeli aggression against Iran is not an isolated event,” Dar said in his address to the forum. “It is part of a dangerous and consistent pattern of militarism that Israel has demonstrated across the Middle East.”

“Pakistan remains deeply concerned at the escalating tensions, deepening instability and humanitarian crises across the Middle East,” he added. “What underpins many of these situations is the continued impunity with which Israel is undermining peace and stability of the broader region.”

The Pakistani deputy PM condemned Israel’s “unprovoked aggression” against Iran as a violation of international law and the UN Charter, warning that such actions posed a grave threat to both regional and global peace.

“We can all feel the reverberations of this instability,” he said.

Turning to Gaza, Dar said Israel was waging a “genocidal campaign” against Palestinians, pointing out that over 55,000 people, mostly women and children, had been killed since the start of the conflict in October 2023.

He noted Israel was deliberately blocking life-saving humanitarian aid and targeting relief workers, leaving millions displaced and entire neighborhoods in ruins.

Calling for an immediate and unconditional ceasefire in Gaza, Dar said that lasting peace in the region was impossible without a viable, sovereign Palestinian state based on pre-1967 borders, with Jerusalem as its capital.

He also referenced last month’s military standoff between Pakistan and India, telling the conference participants that Pakistan had shot down six Indian fighter jets in the confrontation.

He said that his country was committed to regional stability and warned that India’s unilateral actions — including the suspension of the Indus Waters Treaty — were further escalating tensions.

“Pakistan will not allow India to stop water for our people,” he said. “It will be treated as an act of war.”

Dar also urged the OIC to assert itself as a collective voice for the Muslim world.

“The OIC has a crucial role to play in streamlining the rapidly evolving and deteriorating global order to the benefit of the Muslim world,” he added.


Pakistan highlights India’s ‘brazen disregard’ for international law over Indus treaty stance

Pakistan highlights India’s ‘brazen disregard’ for international law over Indus treaty stance
Updated 21 June 2025

Pakistan highlights India’s ‘brazen disregard’ for international law over Indus treaty stance

Pakistan highlights India’s ‘brazen disregard’ for international law over Indus treaty stance
  • Pakistan says India’s treaty suspension shows it cannot be trusted to honor legal obligations
  • The statement follows Indian home minister’s threat to divert river waters, ‘starve’ Pakistan

KARACHI: Pakistan on Saturday accused India of showing a “brazen disregard” for international agreements after New Delhi said it would not restore the decades-old Indus Waters Treaty and divert river waters for internal use.

India put into “abeyance” its participation in the 1960 treaty, which governs the distribution of the Indus river system between the two countries, after 26 civilians in Indian-administered Kashmir were killed in an April gun attack.

India blamed Pakistan for the incident, though it denied any involvement. The accord remains dormant since then despite a ceasefire agreed upon by the two nuclear-armed neighbors last month following their worst fighting in decades.

Islamabad’s statement over the issue came after Indian Home Minister Amit Shah gave an interview to the media, saying New Delhi would not reinstate the treaty that guarantees water access for 80 percent of Pakistan’s farms through rivers originating in India.

“The statement reflects a brazen disregard for the sanctity of international agreements,” Foreign Office Spokesperson Shafqat Ali Khan said in a statement. “The Indus Waters Treaty is not a political arrangement, but an international treaty with no provision for unilateral action.”

“India’s illegal announcement to hold the Treaty in abeyance constitutes a clear violation of international law, the provisions of the Treaty itself, and the fundamental principles governing inter-state relations,” he continued. “Such conduct sets a reckless and dangerous precedent — one that undermines the credibility of international agreements and raises serious questions about the reliability and trustworthiness of a state that openly refuses to fulfill its legal obligations.”

The statement further said India’s attempt to “weaponize water for political ends” was irresponsible and in violation of established norms of state behavior.

It called on India to “immediately rescind its unilateral and unlawful stance” and restore the “full and unhindered implementation” of the treaty.

“Pakistan remains firmly committed to the Treaty and will take all necessary measures to protect its legitimate rights and entitlements under it,” the spokesperson added.

Earlier in the day, the Indian minister said in his interview New Delhi would divert water by constructing a canal, and that Pakistan would be “starved” of water it had been receiving “unjustifiably.”

While Islamabad has pursued diplomatic channels to raise awareness of the issue globally, it has also warned that any Indian attempt to block river flows will be treated as “an act of war.”
With input from Reuters


Pakistan, Turkiye leaders vow diplomatic push to halt Israel’s military campaigns in Mideast

Pakistan, Turkiye leaders vow diplomatic push to halt Israel’s military campaigns in Mideast
Updated 21 June 2025

Pakistan, Turkiye leaders vow diplomatic push to halt Israel’s military campaigns in Mideast

Pakistan, Turkiye leaders vow diplomatic push to halt Israel’s military campaigns in Mideast
  • The Middle East situation came up during a meeting between Ishaq Dar, Asim Munir and Recep Tayyip Erdoğan
  • Both sides stressed the urgency of halting ‘Israeli aggression’ in Gaza, ensuring unhindered humanitarian aid

ISLAMABAD: Pakistan’s Deputy Prime Minister Ishaq Dar and Army Chief Field Marshal Asim Munir met Turkish President Recep Tayyip Erdoğan on Saturday and agreed to step up diplomatic efforts to halt Israel’s military campaigns in the Middle East, as regional tensions threaten to escalate further.

The meeting took place on the sidelines of the 51st session of the Organization of Islamic Cooperation (OIC) Council of Foreign Ministers in Istanbul, where Muslim-majority nations are grappling with regional crises.

Two of the bloc’s key members — Pakistan and Iran — have recently faced military escalations with regional adversaries. While Pakistan’s brief but intense standoff with India last month ended in a ceasefire, Israel’s strikes on Iranian nuclear and military sites, launched over a week ago, have shown no signs of letting up.

“The leaders [of Pakistan and Turkiye] expressed strong condemnation of the continued Israeli attacks in blatant violation of fundamental principles of international law, reiterated support for Iran’s sovereignty, territorial integrity and its right to self-defense under the UN Charter, agreed to continue diplomatic efforts to de-escalate the situation and urged the international community to play its part in restoring peace and stability in the region,” the Foreign Office in Islamabad said in a statement.

“Both sides emphasized the urgency of galvanizing efforts to bring an immediate halt to the Israeli aggression in Gaza and unhindered provision of humanitarian assistance to the besieged people of Gaza,” the statement added.

As Iran and Israel continue to trade fire, European and regional powers are racing to contain the conflict and bring Iran back to the negotiating table to resume nuclear negotiations that broke down when Israel launched its strike on Tehran and other cities.

During Saturday’s meeting, Dar underscored Pakistan’s commitment to strengthening bilateral ties with Turkiye.

The two sides reaffirmed their desire to deepen cooperation, particularly in light of Turkiye’s diplomatic support for Pakistan during last month’s flare-up with India, which saw both nuclear-armed neighbors exchange missiles, drone fire and airstrikes before tensions subsided under international pressure.

Dar also congratulated Erdoğan on receiving an award from the Islamic Cooperation Youth Forum in recognition of his leadership and the successful organization of the ongoing OIC ministerial session.


PM Sharif orders early Hajj planning, calls for private scheme reform

PM Sharif orders early Hajj planning, calls for private scheme reform
Updated 21 June 2025

PM Sharif orders early Hajj planning, calls for private scheme reform

PM Sharif orders early Hajj planning, calls for private scheme reform
  • A major portion of the quota for private Hajj operators remained unutilized this year
  • Shehbaz Sharif says no negligence in serving Hajj pilgrims next year will be tolerated

KARACHI: Prime Minister Shehbaz Sharif on Saturday directed the religious affairs ministry to begin preparations for the 2026 Hajj immediately, while calling for urgent reforms to the country’s private Hajj scheme following a situation that left thousands of pilgrimage slots unused this year.

Pakistan received a quota of 179,210 pilgrims from șÚÁÏÉçÇű for Hajj 2025, which was evenly divided between the government and private Hajj operators.

While the government filled its full allocation of over 88,000 pilgrims, a major portion of the private quota remained unutilized due to delays by companies in meeting payment and registration deadlines.

Private operators, however, blamed the situation on technical glitches such as payment issues and communication breakdowns.

“Preparations for next year’s Hajj operation must begin immediately,” the prime minister said, according to a statement released by his office.

“The operational plan should be developed in accordance with the Hajj policy issued by șÚÁÏÉçÇű,” he continued. “No negligence in serving pilgrims next year will be tolerated.”

Sharif also emphasized the need to “regularize” the private Hajj scheme.

Previously, Pakistan’s religious affairs minister, Sardar Muhammad Yousaf, had confirmed that over 67,000 private-sector slots went unused, despite a last-minute effort to reclaim some of the allocation.

The shortfall prompted criticism and concerns over regulation and the capacity of private Hajj companies.

The prime minister has also asked the religious affairs ministry to submit a detailed Hajj action plan with clear deadlines and start preparing for next year’s Islamic pilgrimage.


PM Sharif seeks action after two police officers shot dead in northwest Pakistan

PM Sharif seeks action after two police officers shot dead in northwest Pakistan
Updated 21 June 2025

PM Sharif seeks action after two police officers shot dead in northwest Pakistan

PM Sharif seeks action after two police officers shot dead in northwest Pakistan
  • The officers had stopped to get water when they were ambushed by gunmen on a motorbike
  • The prime minister praises the efforts of police officials fighting militancy on the front lines

PESHAWAR: Two police officers were shot and killed when unidentified assailants opened fire on their mobile patrol van in Swabi, a district in Pakistan’s northwestern Khyber Pakhtunkhwa (KP) province, with Prime Minister Shehbaz Sharif on Saturday directing authorities to bring the perpetrators to justice.

The attack took place around 10:00 p.m. Friday night near a roadside kiosk within the jurisdiction of the Gadoon police station, according to Abdul Majid, a senior police officer in Swabi.

The officers had briefly stopped to get water when they were ambushed by gunmen on a motorbike.

“Terrorists riding a motorbike opened fire on the police party,” Majid told Arab News over the phone. “Two officers were martyred on the spot.”

Militant attacks in KP, particularly by Tehreek-e-Taliban Pakistan (TTP), have increased in recent years, with security forces, government officials and civilians often targeted.

The Pakistani military and law enforcement agencies have launched intelligence-based operations to curb the violence, but attacks have persisted.

Following the shooting, a large police contingent was deployed to the area to secure the scene, collect forensic evidence and launch a search operation.

No arrests have been made so far, and the investigation is ongoing. No group has so far claimed responsibility for the attack.

Prime Minister Shehbaz Sharif condemned the Swabi attack and expressed deep sorrow over the deaths of the police officers.

“We pay tribute to the martyrs and pray for patience for their families,” he said in a statement issued by the Prime Minister’s Office.

Sharif directed authorities to investigate the incident and ensure those responsible are brought to justice.

“The war against terrorism will continue until this scourge is eradicated from the country,” he said, praising the efforts of police officers fighting on the front lines.