If concessional agreements are not reached with Chinese IPPs, then a fund of Rs 1.225 trillion will not be available

A complex situation has arisen between Pakistan and Chinese power companies. The government’s dues to Chinese IPPs have crossed Rs560 billion, up from Rs430 billion in June 2025, an increase of Rs130 billion in less than a year. Fed up with the continuous delay in payments, Chinese companies are now knocking on various forums, including the CPEC Secretariat.

The government has obtained a Circular Debt Fund of Rs1.225 trillion from 18 commercial banks, but the federal cabinet has made the release of this fund conditional on the Chinese IPPs’ consent to concessional agreements. The government wants Chinese companies to sign new agreements like other IPPs, but the Chinese companies are not yet ready.

Before Prime Minister Shahbaz Sharif’s visit to China, the government made payments of Rs100 billion to 16 Chinese power projects to maintain confidence. But Port Qasim Electric Power Company has clearly stated that it reserves the right to stop power generation if the dues are not paid.

The IMF has called for tariff adjustments, subsidy reductions and additional surcharges, calling the energy sector’s circular debt a major economic risk. The total circular debt of the energy sector has now reached close to Rs 1.8 trillion and the crisis will deepen until the matter with Chinese companies is resolved.