Government Intensifies Efforts to Secure Concessional Deals with Chinese IPPs Amid Rising Circular Debt
Islamabad: The government has accelerated efforts to persuade Chinese Independent Power Producers (IPPs) to sign new concessional agreements as Pakistan’s energy sector faces mounting financial pressure.
According to sources, the release of a Rs1.225 trillion circular debt fund has been linked to the successful negotiation of revised agreements with Chinese IPPs. The National Energy Task Force has reportedly finalized a proposed framework aimed at bringing Chinese power companies on board.
Sources said outstanding government dues to Chinese IPPs have now exceeded Rs560 billion, compared to Rs430 billion in June 2025. Due to ongoing financial constraints, payments to Chinese power projects have been repeatedly delayed, prompting several Chinese companies to approach forums including the China-Pakistan Economic Corridor (CPEC) Secretariat for recovery of their dues.
The government has proposed that Chinese IPPs adopt concessional arrangements similar to those accepted by other IPPs in Pakistan. However, Chinese power companies are reportedly reluctant to accept the proposed terms. Ahead of Prime Minister Shehbaz Sharif’s visit to China, the government reportedly released Rs100 billion to 16 Chinese power projects in an effort to maintain confidence and ease tensions.
Sources further revealed that the government had obtained loans worth Rs1.225 trillion from 18 commercial banks. Pakistan’s energy sector circular debt has now reportedly reached nearly Rs1.8 trillion. Due to the lack of agreement from Chinese IPPs, a major portion of the circular debt fund has not yet been released. The federal cabinet has also linked the release of funds to the consent of the Chinese projects.
The government has indicated that either the agreements will be revised or payments will continue under existing arrangements.
Meanwhile, Port Qasim Electric Power Company has expressed serious concerns over delayed payments, warning that it reserves the right to halt electricity generation if outstanding dues are not cleared.
Sources also stated that the International Monetary Fund (IMF) has identified Pakistan’s energy sector circular debt as a major economic risk and has urged the government to implement tariff adjustments, reduce subsidies, and impose additional surcharges to address the financial crisis in the energy sector.
