World Bank Arm, ADB Criticize Pakistan Over Revising Power Deals

Global lenders including a unit of the World Bank and Asian Development Bank have slammed Pakistan for renegotiating contracts with power producers and warned the move will undermine investor confidence and future private investments.

Renegotiating the wind and solar power purchase agreements “in a non-consultative manner will be detrimental to the long-term development of the sector,” International Finance Corp. and ADB, which are among many lenders that funded the power projects, said in a Feb. 18 joint letter to the government and seen by Bloomberg.

The lenders together provided $2.7 billion in financing to Pakistan's power sector over the past 25 years, according to the letter, which was earlier reported by Business Recorder and Financial Times. The power producers are “not permitted to agree to the changes to any major project document” without the prior approval from the lenders first, they wrote.

The development came as Prime Minister Shehbaz Sharif's cabinet last month approved revised agreements with 14 power firms that saved the country 1.4 trillion rupees ($5 billion). The government has said it is talking to about 100 power producers to revise contracts and reduce the payments burden while confirming the involvement of the country's powerful military in these talks.

Owners and chief executive officers of power companies have been called separately or in groups to the offices of the army in Islamabad and Karachi multiple times asking them to agree to reduced payments made to them for power generation, people familiar with the matter, who requested not to be named, said.

The South Asian nation's power minister Awais Leghari at a news conference in Nov. confirmed the military's involvement in talks by expressing gratitude to Army Chief General Asim Munir for his support that made the revision of contracts possible. Pakistan's army has ruled the country directly or indirectly for most of its modern history and it has the final say in all important policy decisions.

The army's media wing, ADB and the International Finance Corp. did not respond to requests for a comment.

Pakistan is separately in talks with China to stagger debt payments for power plants they set up in the country under the Belt and Road Initiative.