The government is facing challenges in fully utilizing a Rs. 1.225 trillion circular debt financing facility as negotiations continue with Chinese Independent Power Producers (IPPs) operating under the China-Pakistan Economic Corridor (CPEC).
According to a report by Business Recorder, the National Energy Task Force, led by Power Minister Sardar Awais Ahmed Khan Leghari, has finalized a proposed framework for talks aimed at securing revised settlement agreements with Chinese power producers.
Official sources said the Central Power Purchasing Agency (CPPA) currently owes more than Rs. 560 billion (nearly $2 billion) to Chinese power projects, with outstanding arrears increasing over the past year.
The government has been urging Chinese Independent Power Producers to participate in the circular debt reduction facility and accept revised payment structures similar to agreements reached with other IPPs. However, several Chinese investors have reportedly resisted signing new settlement terms or offering discounts on pending receivables.
The federal government had secured a Rs. 1.225 trillion loan from 18 commercial banks as part of its broader plan to reduce mounting circular debt in the power sector, which is estimated at nearly Rs. 1.8 trillion.
However, a significant portion of the funds remains undisbursed due to unresolved negotiations with CPEC-linked power projects that have not yet accepted revised settlement conditions approved by the federal cabinet.
Sources said around Rs. 100 billion had previously been released to nearly 16 Chinese power projects ahead of Prime Minister Shehbaz Sharif’s visit to China in 2025, but authorities are now avoiding further ad hoc payments without broader restructuring agreements.
Chinese IPPs have reportedly raised concerns over delayed payments through multiple forums, including the CPEC Secretariat, as investor confidence weakens due to mounting receivables.
In a separate development, Port Qasim Electric Power Company has warned that persistent delays in payments could allow it to suspend operations under provisions of its Power Purchase Agreement, highlighting growing risks in Pakistan’s energy sector liquidity crisis.
