In a major financial development ahead of Prime Minister Shehbaz Sharif’s visit to China, Pakistan has cleared over Rs100 billion in overdue payments to Chinese power producers. The move reduces outstanding CPEC-related dues by nearly 25%, easing one of Beijing’s major concerns.
Officials confirmed the Ministry of Finance authorized the release of the funds from the subsidy allocations in the federal budget. An additional Rs8 billion was also allocated separately for payments.
The settlement comes just before PM Shehbaz departs for Beijing to attend the Shanghai Cooperation Organization (SCO) summit and an investment conference. Sources said he had instructed the Finance Ministry to ensure payments to Chinese IPPs were cleared before August 25.
By June 2025, Pakistan’s dues to Chinese plants had reached Rs423 billion. The new payment reduces this figure to just above Rs300 billion. Since 2017, Islamabad has already paid Rs5.1 trillion to 18 Chinese power plants, covering over 92% of their billed amounts. Officials argue that much of the remaining dues are inflated by surcharges rather than principal amounts.
Energy officials said the largest share of the Rs100 billion would go to coal-based plants, including Sahiwal, Hub, and Port Qasim. Pakistan still owes Rs87 billion to the Sahiwal project, Rs69 billion to Hub, Rs85.5 billion to Port Qasim, and Rs55.5 billion to Thar Coal.
Meanwhile, Pakistan is working on raising Rs1.3 trillion in new loans to retire circular debt across multiple power producers. However, the agreement is yet to be finalized.
Analysts note that circular debt officially declined by Rs801 billion this year, but according to the FPCCI, this reduction came from one-time stock adjustments financed through subsidies, not from genuine performance improvements. In fact, after excluding these measures, the debt has actually increased by Rs379 billion.
The 2015 CPEC Energy Framework Agreement obligates Pakistan to maintain a revolving fund to protect Chinese firms from circular debt delays. However, past governments failed to fully implement the mechanism, worsening financial strains and slowing project progress.