CPEC dues soar to PKR 423 billion amid Pakistan's fiscal mismanagement, mounting debt crisis

Islamabad [Pakistan], July 28 (ANI): Despite repeated promises and agreements, the Pakistani government has once again failed to honour its financial commitments under the China-Pakistan Economic Corridor (CPEC), with outstanding payments to Chinese power producers ballooning to PKR 423 billion by June 2025, The Express Tribune reported.
According to The Express Tribune, this marks yet another increase, PKR 22 billion more than last year, highlighting ongoing mismanagement in the energy sector.
Since 2017, Pakistan has paid PKR 5.1 trillion to 18 Chinese power plants. However, officials admit that a large portion of the current dues, over PKR 100 billion, is comprised of late payment penalties, rather than energy costs, as reported by The Express Tribune.
These delays reflect a chronic inability to manage payments on time, undermining trust with one of Pakistan's largest investors.
Instead of resolving the crisis through reform, the government is turning once again to massive borrowing, seeking PKR 1.3 trillion in new loans from commercial banks just to temporarily plug the widening circular debt, The Express Tribune reported.
This stopgap measure avoids real accountability and only deepens the debt burden. The plan to ask Chinese firms to waive interest payments in exchange for upfront settlement seems naive, especially since Beijing has consistently insisted on full contractual obligations.
Pakistan now faces the tough choice of either paying everything in one go or dragging out payments, The Express Tribune reported.
The PKR 423 billion in unpaid bills flagrantly violates the 2015 CPEC Energy Framework Agreement, which requires Pakistan to pay in full, regardless of its billing shortfalls.
This breach, alongside mounting security concerns, has slowed new Chinese investment, while Pakistani leaders continue making hollow appeals for fresh support, The Express Tribune reported.
A revolving fund meant to protect Chinese companies, mandated to hold 21 per cent of invoice values, was opened in late 2022, but the government crippled its function by limiting withdrawals to a mere PKR 4 billion per month.
This has rendered the mechanism ineffective, and the backlog continues to grow.
The breakdown of dues shows alarming numbers. PKR 87 billion is owed to the Sahiwal coal plant, PKR 69 billion to Hub power, PKR 85.5 billion to Port Qasim, and tens of billions more to other projects, The Express Tribune reported.
These mounting debts are a troubling reflection of Pakistan's deteriorating fiscal discipline.
Despite multiple diplomatic warnings from China, Islamabad continues to delay action, relying on new loans instead of addressing the structural flaws that plague its power sector. The government's much-publicised deal with commercial banks, worth PKR 1.25 trillion at slightly reduced interest, still adds to the country's already substantial debt. While officials claim the loans won't count toward public debt, this creative accounting does little to solve the underlying crisis, The Express Tribune reported.
Even now, efforts to reschedule payments or convert interest to yuan have gone nowhere. Chinese authorities remain unconvinced, and Pakistani appeals have failed to produce tangible results. (ANI)