Under the China-Pakistan Economic Corridor (CPEC), the revolving debt of Chinese power projects has reached a staggering amount of 493 billion rupees, marking the highest level to date. These loans have seen a three-fourths increase during the past seven months alone, according to reports.
By the end of January, loans for Chinese power generation and transmission projects had surged to 493 billion rupees, compared to 214 billion rupees in June last year, reflecting a 77% increase during the past seven months. This surge in debt has raised concerns within the Pakistani government, prompting repeated diplomatic pressures from the Chinese government and casting a shadow over Pakistan-China economic relations.
It’s noteworthy that in a bid to meet the obligations of Pakistani power plants, China has conditioned a $600 million trade loan. This situation underscores the challenges faced by Pakistan’s energy sector and the hurdles in fulfilling its financial commitments.
It’s worth remembering that Pakistani authorities had agreed to establish a revolving fund and allocate 21% of the collected dues from power companies. However, the government’s failure to implement this agreement has resulted in a drastic increase in revolving debts. Instead of establishing the fund, Pakistan has opened a Pakistan Energy Revolving Account in the State Bank, from which 48 billion rupees annually can be withdrawn, providing only a fraction of the required funds.
Reports indicate that out of the 493 billion rupees, Saifullah Power Plant, running on imported coal, is liable for 97 billion rupees, Hub Power Project for 82 billion, Port Qasim Power Plant for 80 billion, and Thar Coal Project for 79 billion rupees. The Chinese government’s repeated diplomatic pressure for these repayments has brought negative repercussions to Pakistan-China economic relations, raising concerns about the financial sustainability of CPEC projects.