Pakistan has suffered a setback in its efforts to ease financial pressure after China declined a request to waive billions of rupees in outstanding dues linked to China-Pakistan Economic Corridor (CPEC) power projects. According to reports, the unpaid liabilities have reached approximately Rs423 billion, including a substantial amount in late payment surcharges, adding to the country’s growing energy sector challenges.
The Pakistani government had requested relief on the accumulated late payment charges as part of broader efforts to reduce circular debt and lower electricity costs for consumers. However, Chinese lenders and independent power producers (IPPs) reportedly maintained that the contractual obligations remain valid and declined to write off the outstanding amounts.
Officials are now exploring alternative financing options to address the issue. One proposal under consideration involves securing around $10 billion in low-cost financing from friendly countries or bilateral partners to refinance expensive Chinese energy-related debt. The strategy aims to reduce financing costs while helping stabilize Pakistan’s power sector. (The Express Tribune)
The unresolved dues continue to complicate Pakistan’s efforts to tackle circular debt, which has placed significant pressure on electricity tariffs and public finances. Negotiations with Chinese CPEC power producers over tariff rationalisation and debt restructuring have been ongoing for months, but government officials have acknowledged that discussions have yet to produce the desired outcome.
Despite the setback, Pakistan and China continue to maintain close economic cooperation under CPEC, one of the flagship projects of China’s Belt and Road Initiative. Authorities from both sides are expected to continue discussions on financial restructuring and payment mechanisms to ensure the long-term sustainability of CPEC energy investments.
While the refusal to waive the outstanding dues presents an immediate financial challenge, policymakers remain focused on finding mutually acceptable solutions that protect investor confidence, maintain energy supplies, and support Pakistan’s broader economic recovery. The outcome of future negotiations will play an important role in shaping the next phase of CPEC’s development and the country’s power sector reforms.
