The government of Pakistan is continuing efforts to convince Chinese Independent Power Producers (IPPs) working under the CPEC to accept revised settlement agreements.
Officials say these agreements are necessary to release funds from a large Rs. 1.225 trillion bank facility designed to reduce the country’s growing circular debt.
According to sources, the Central Power Purchasing Agency-Guaranteed (CPPA-G) currently owes more than Rs. 560 billion (around $2 billion) to Chinese power companies.
This amount has increased from about Rs. 430 billion recorded at the end of June 2025, mainly due to ongoing delays in payments caused by financial pressures on the government.
A special National Energy Task Force, led by the Power Minister Sardar Awais Ahmed Khan Leghari along with senior officials, has developed a negotiation plan for Chinese IPPs.
The government wants these companies to agree to revised contracts similar to those already signed with other independent power producers in Pakistan.
However, Chinese energy firms have so far not agreed to the proposed changes. Because of this, a large portion of the bank facility remains unused, despite being arranged through 18 commercial banks to help reduce Pakistan’s Rs. 1.8 trillion circular debt burden.
Officials say the government had already made around Rs. 100 billion in payments to several Chinese power projects before the Prime Minister’s visit to China in August 2025. But authorities are now avoiding additional ad hoc payments unless new settlement agreements are finalized.
The federal cabinet has also decided that disbursement from the financing package will only continue if IPPs agree to revised terms and discounted settlements. Without these agreements, the release of funds will remain blocked.
Authorities believe that resolving these negotiations is essential to stabilize the energy sector, improve cash flow, and reduce long-term financial pressure on the power system.