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> (potentially stranding those utility fossil generation assets and their capital investment).

This is not true. For most of Pakistan's power plants, the loans (denominated in US dollars) were given in exchange of sovereign guarantees by the State of Pakistan. So, the capitalists, in theory, don't have anything to worry about. The whole country could switch to renewables, and the State of Pakistan will still have to pay back on their investments. The reason for the sovereign guarantee is because Pakistan does not have a stable political landscape, so the free market risk is too high for such large investments.

In practice, the government is forcing local investors to renegotiate some of the loan terms or contracts to reduce its payment obligations [1]. When I say forcing, I mean, mafia style. It's not clear how much this will help.

[1] https://www.brecorder.com/news/40331398

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algo_trader 10 hours ago | parent | next [-]

Also see my comment here https://news.ycombinator.com/item?id=42268194

If you are a local resident, is this true?

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toomuchtodo 9 hours ago | parent | prev [-]

Someone is taking a haircut on that debt, that is the stranding. Whether it’s Pakistan, the World Bank, or institutional investors, ¯\_(ツ)_/¯. They could forgive the debt instead, but humans gonna human.

Sovereign defaults are a thing, and sometimes necessary. It’s just numbers in a spreadsheet or database after all.

	▲	abdullahkhalids 8 hours ago \| parent [-]
		Institutions like World Bank, Asian Development Bank or IMF will not take any sort of cuts or deviations from the loan schedule. International commercial investors won't also. They are also too many to negotiate with. Defaulting on those loans will send Pakistan's bonds and exchange rate into a tailspin. That leaves other countries. US and Europe will not change loan terms either. So what has happened since 2018, is that Pakistan takes additional loans from China, UAE or Saudia Arabia to pay off other loans. If then Pakistan is unable to pay their loans backs, these countries reschedule payments into the future. But because of consistent refusal of the Pakistan state and elite to restructure and improve the economy has meant that even these countries have lost their appetite for help.