Govt. pays Rs 100 billion to Chinese power projects ahead of PM’s China visit amid circular debt concerns

ISLAMABAD The government has reportedly paid Rs 100 billion to nearly 16 Chinese power sector CPEC projects, including coal-fired power plants, fearing that delays could embarrass Prime Minister Shehbaz Sharif during his upcoming visit to China starting August 31, 2025, well-informed sources told Newzshewz.
At a recent meeting chaired by the Minister for Planning, Development, and Special Initiatives, Ahsan Iqbal, the Secretary of Finance was directed to ensure that a minimum payment of Rs 100 billion related to circular debt owed to Chinese Independent Power Producers (IPPs) be transferred by August 25, 2025, the sources added.
The concerned authorities have completed all procedural formalities to pay the Rs 100 billion to these 16 Chinese CPEC projects. The State Bank of Pakistan (SBP) is scheduled to remit the amount today (Tuesday), the sources said.
Coal-fired power projects are expected to receive Rs 15 to Rs 16 billion each, while other projects will receive payments ranging between Rs 2 billion and Rs 3 billion.
As of June 30, 2025, the circular debt owed to CPEC IPPs stood at Rs 430 billion, but it has since risen to approximately Rs 475 billion.
The government is arranging a Rs 1.275 trillion loan from 18 commercial banks to reduce the overall circular debt stock, which stood at Rs 1.614 trillion as of June 30, 2025.
However, the disbursement of this Rs 1.275 trillion loan aimed at eliminating circular debt in Pakistan’s power sector has hit a roadblock. The government refuses to proceed until CPEC IPP projects agree to a discount on their outstanding payments.
Significant uncertainty remains regarding the contribution of each bank and the allocation of funds to the Independent Power Producers. A large portion of the loan is earmarked for payments to CPEC-related energy projects.
“The Federal Cabinet has decided that the funds cannot be disbursed unless the CPEC projects agree to a discount,” an insider revealed.
According to sources, the government is considering two options: renegotiating payments to CPEC projects under new terms or proceeding with current payment schedules, but only if the CPEC stakeholders agree to a discount. Otherwise, a new proposal may be necessary to pay the full overdue amounts without any deductions.
“Until it is decided how much money the Power Division will draw from each bank and how much will go to each IPP, the entire plan remains in limbo,” the source added.
Recently, the Chief Executive Officer (CEO) of Port Qasim Electric Power Company (PQEPC), Wang Dongfeng, wrote a letter to the Finance Minister stating that the shareholders and sponsors of the project, including those from China and Qatar, have expressed “significant discontent” over the payment backlog and requested urgent measures to reduce the outstanding amount.
“We would like to notify that the current dues entitle PQEPC to suspend plant operations under Section 9.10 of the Power Purchase Agreement (PPA), without any liability for Liquidated Damages (LDs),” the CEO warned.
He emphasized that suspension of operations would result in a “lose-lose” outcome that both sides must avoid through timely settlement of dues to ensure sustainable power generation and prevent triggering defaults under loan agreements and the Government of Pakistan’s sovereign guarantee. Ends