Govt’s Rs1,257bn Debt Plan Stuck as Chinese IPPs Refuse to Waive Charges

The government’s plan to clear Rs1,257 billion circular debt has hit a serious roadblock. Chinese Independent Power Producers (IPPs) have refused to waive the Late Payment Surcharge (LPS) on their outstanding dues, officials confirmed on Tuesday.

The plan was designed to reduce debt through a settlement backed by commercial banks. However, the International Monetary Fund (IMF) has not yet endorsed the procedural framework. Without IMF’s approval, the deal cannot move forward.

Chinese IPPs Decline Waiver

There are 18 Chinese IPPs operating under the China-Pakistan Economic Corridor (CPEC). In the past nine years, from 2017 to 2025, their total billing reached Rs5.48 trillion. Out of this, Rs5.06 trillion has already been paid, leaving Rs423 billion still outstanding.

Officials said most of this pending amount includes capacity payments (Rs230 billion) and interest payments (Rs177.7 billion). The largest dues are owed to Huaneng Shandong Ruyi (Rs87 billion), Port Qasim Electric Power (Rs85 billion), and China Power Hub Generation (Rs70.4 billion).

“The Chinese IPPs are not willing to waive the LPS. The Ministry of Power may need approval to pay interest in addition to the main circular debt,” sources told The News.

Govt Efforts and Bank Deal

The Central Power Purchase Agency (CPPA) is finalising a deal with banks to release Rs1,257 billion within 15 days of approval. The agreement is based on KIBOR minus 0.9%, which would put the repayment rate at nearly 10.1%.

Despite this, Islamabad is struggling to convince Chinese firms. Officials say talks are ongoing, but no major breakthrough has been achieved yet.

Diplomatic Angle

Prime Minister Shehbaz Sharif is set to visit China soon, while Finance Minister Muhammad Aurangzeb may also travel next month. The government is considering launching a Panda bond in China to raise funds.

Officials admit the issue with Chinese IPPs remains the biggest stumbling block in fixing Pakistan’s circular debt. The Finance Ministry says while focus is also on flood relief after recent rains, clearing this debt remains a top priority.