Pakistan’s Solar Boom Creates Headaches for Government Energy Debts
More and more Pakistani families and businesses are turning to rooftop solar panels to dodge skyrocketing electricity bills from the national grid. This shift is hitting the cash-strapped government hard, as it struggles to pay off massive energy debts while power sales drop.
Pakistan’s government buys electricity from power plants—many funded by loans from China—and sells it to consumers. But it often operates at a loss, relying on those sales to repay creditors. Now, with households generating their own clean solar power, collections are falling fast, reports Bloomberg.
The International Monetary Fund (IMF) has warned Pakistan to keep customers hooked to the grid to save the energy sector. In response, lawmakers are pushing tough reforms, like slapping import tariffs on solar panels. These duties were missing earlier, letting the solar rush explode quietly. An initial 18% tax proposal got slashed in half after public outcry.
Imports of solar panels and batteries from China are surging. This year alone, Pakistan brought in $1.5 billion worth of panels, making it the world’s third-largest importer, according to Bloomberg NEF. Experts estimate the country now has 25 gigawatts of solar capacity installed off the books—without any government help. That’s a huge addition to the grid’s total 50 gigawatts.
To fight back, the government aims to ramp up use of coal-fired plants or even shut some down and repurpose them. Just this month, Pakistan sealed its biggest debt restructuring yet: new loans from 18 banks totaling 1.2 trillion rupees (about $4.2 billion) to tackle power sector debts.
Muhammad Ali, a key advisor on the prime minister’s energy taskforce and Pakistan’s privatization minister, sounded the alarm in an interview. "Unless we revise our solar policy, this defection from the grid will continue," he said. "That will further pressure Pakistan’s energy system that’s already dealing with a glut, and the government must help create new demand."
Adding to the woes is the China-Pakistan Economic Corridor (CPEC), once hailed as an economic powerhouse. Instead, it’s become a $9.5 billion debt trap. The project promised jobs and growth but fell short on targets, sparking controversies over delays, cost overruns, and shady deals.
Pakistan now owes over $7.5 billion for building power plants, plus another $2 billion in "circular debt"—unpaid bills to Chinese energy firms. Delays in the next phase, CPEC 2.0, have blocked plans for a strong industrial base to drive exports and ease the debt load. As a result, the country keeps borrowing just to cover old loans, trapping it in a vicious debt crisis.
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