Unpaid CPEC Power Dues Reach PKR 423 Billion

Outstanding payments to China Pakistan Economic Corridor (CPEC) power projects remained at PKR 423 billion at the end of June 2026, as the government has yet to resolve disputes over late payment surcharge (LPS) claims.

 

According to government officials, Islamabad is exploring up to USD 10 billion in low cost financing from bilateral partners to refinance expensive Chinese energy loans and reduce electricity tariffs. Pakistan is reportedly considering loans from Saudi Arabia ranging between USD 6 billion and USD 10 billion, although Power Minister Sardar Awais Laghari said such financing was not on the agenda of his recent visit to the Kingdom.

 

The proposal seeks financing at around 1% interest, with annual borrowing of USD 1.1–1.4 billion between 2027 and 2034. The funds would be used to repay high cost debt incurred for CPEC power projects, with repayments spread over 15 years after a three year grace period through the Central Power Purchase Agency Guaranteed (CPPA-G).

 

The Power Division estimates that debt servicing costs account for more than one-third of Pakistan's average electricity tariff. Of the average tariff of around 11 US cents per unit (excluding taxes), nearly 4 US cents are attributed to debt repayment obligations, limiting the government's ability to further reduce electricity prices.

 

Government documents show electricity consumers are expected to bear around USD 30.6 billion in power sector debt repayments over the next 13 years, in addition to servicing approximately USD 5.7 billion in circular debt through the debt service surcharge.

 

Officials said efforts to secure concessional financing from multilateral institutions have made limited progress, while negotiations with Chinese lenders and power producers remain unresolved. Chinese stakeholders have reportedly declined to waive around PKR 170 billion in late payment surcharge, which the government wants settled before clearing more than PKR 260 billion in principal energy payments.

 

The unresolved dispute has also limited the government's ability to fully utilize the PKR 1.25 trillion banking facility established to reduce circular debt. Authorities are now seeking a six month extension of the facility after its expiry in June.

 

The report noted that the PKR 423 billion in outstanding dues is inconsistent with the commitments under the 2015 CPEC Energy Framework Agreement, which requires timely payments to Chinese power projects. Although Pakistan established a Pakistan Energy Revolving Account in 2022 to support these payments, withdrawal limits have contributed to the accumulation of unpaid liabilities.

 

Among the largest outstanding amounts are approximately PKR 85 billion owed to the Sahiwal coal fired power plant, PKR 76 billion to the Port Qasim power project, PKR 64 billion to the Hub coal fired plant, PKR 54 billion to the Thar Coal project, PKR 43 billion to Engro Powergen Thar, PKR 28 billion to the Matiari Lahore Transmission Line, PKR 17.5 billion to Karot Power Company, and PKR 11.5 billion to Thar Energy Limited.