In a bid to ease financial strains and address Beijing’s long-standing concerns, Pakistan has decided to settle Rs100 billion in dues owed to Chinese power producers ahead of Prime Minister Shehbaz Sharif’s visit to China later this week.
According to Finance Ministry officials, the funds will be released from power sector subsidies allocated in the current fiscal budget, with disbursement expected within days. An additional Rs8 billion has also been earmarked from routine budgetary provisions for Chinese Independent Power Producers (IPPs).
Outstanding liabilities trimmed
As of June, Pakistan’s unpaid dues to CPEC-linked Chinese power projects stood at Rs423 billion. This clearance will bring the figure down by nearly one-fourth, leaving just over Rs300 billion outstanding.
Despite regular repayments, liabilities have kept piling up. Since 2017, Pakistan has paid Rs5.1 trillion to 18 Chinese IPPs, covering about 92% of billed costs, including interest. Officials argue that the actual remaining principal is now below Rs300 billion, with much of the balance tied to late payment surcharges.
CPEC agreement and debt crisis
The 2015 CPEC Energy Framework Agreement obligates Pakistan to clear all dues to Chinese investors, regardless of recoveries from consumers. However, unpaid bills and rising circular debt have created friction in bilateral energy cooperation.
To address the crisis, the government is negotiating Rs1.3 trillion in fresh borrowing from local commercial banks to retire debts owed across state-owned, private, nuclear, and Chinese plants. The deal is yet to be finalised.
PM’s upcoming China visit
Prime Minister Shehbaz Sharif is scheduled to travel to Beijing this weekend for the Shanghai Cooperation Organisation (SCO) Heads of State meeting, where he will also attend an investment conference. Clearing Chinese IPP dues is being viewed as a confidence-building measure ahead of the trip, as both sides seek to reinvigorate economic ties under CPEC.
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