Pakistan Releases Rs. 100 Billion Payment to Ease Chinese Power Sector Concerns

In a move aimed at addressing one of Beijing’s longstanding concerns, Pakistan has decided to clear Rs. 100 billion in dues owed to Chinese power producers before Prime Minister Shehbaz Sharif’s upcoming visit to China. The payment is expected to reduce Islamabad’s outstanding liabilities to Chinese Independent Power Producers (IPPs) by nearly one-fourth. Officials in the Ministry of Finance confirmed that instructions have been issued to release the funds from the power sector subsidy earmarked in the current fiscal year’s budget. The disbursement is expected within the next couple of days, they added, reported Express Tribune. In addition to the Rs. 100 billion, another Rs. 8 billion has been allocated from routine budgetary provisions for Chinese power producers. The settlement comes just days before PM Shehbaz is scheduled to travel to Beijing to attend the Heads of State meeting of the Shanghai Cooperation Organization (SCO) this weekend. He is also expected to participate in an investment conference hosted by Pakistan’s embassy. According to the report, the premier directed the Finance Ministry to ensure the Rs. 100 billion clearance before August 25. As of June, Pakistan’s unpaid dues to Chinese power projects under the China-Pakistan Economic Corridor (CPEC) stood at Rs. 423 billion. Following this settlement, the outstanding amount will fall to just over Rs. 300 billion. Despite Pakistan’s consistent repayments, liabilities to Chinese power plants have continued to mount. Since 2017, Islamabad has paid Rs. 5.1 trillion in energy costs to 18 Chinese IPPs, roughly 92% of their billed amount, including interest. Officials argue that the actual outstanding principal is now less than Rs. 300 billion, with the remainder largely comprising late payment surcharges. The Finance Ministry is also negotiating nearly Rs. 1.3 trillion in fresh borrowing from local commercial banks to retire circular debt owed to state-owned, private, nuclear, and Chinese power plants. However, the arrangement is yet to be finalized. The Rs. 423 billion in unpaid dues represent a violation of the 2015 CPEC Energy Framework Agreement, which obliges Pakistan to fully clear power sector liabilities regardless of recoveries from end-consumers.