China is Concerned Over Pending $1.5 Billion Payments

Beijing has voiced serious concerns about $1.5 billion in overdue payments to CPEC independent power plants (IPPs), as well as currency exchange restrictions imposed by the State Bank of Pakistan. In a letter to the Planning Commission on March 13, 2023, Special Assistant to the Prime Minister (SAPM) (Coordination) Syed Tariq Fatemi stated that China’s Charge d’Affaires Pang Chunxue met with him and expressed concern about the CPEC power projects, reported Express Tribune. The SAPM said, “Overdue payments to the Chinese IPPs currently stand at $1.5 billion. This is causing huge concern among Chinese businesses”, adding that “these power plants require specific-grade coal for electricity production. If the same is purchased from the local spot market, then NEPRA requires that the price should not be higher than the price of imported coal, which is not feasible due to exchange rate fluctuation/ rupee devaluation”. China’s Pang Chunxue told Fatemi that there were gaps between the revolving fund formed by Pakistan and the revolving account agreement that it signed with China. She also said the power plants were operating at less than full capacity due to difficulties in obtaining the required amount of coal for power production. Many Chinese companies were having difficulty clearing customs at Karachi Port due to import curbs. Chunxue suggested that all these concerns could have been addressed in joint committee meetings had the sessions continued since the committee’s last meeting in December 2022. Pertinently, Islamabad last month was ready to modify the Pakistan Energy Revolving Account (PERA) to address Chinese lenders’ concerns over future payments to CPEC IPPs. However, concerns posed by China’s Charge d’Affaires suggest any resolution had yet to be reached as fiscal bottlenecks prevent progress.