Pakistan Refuses Rs220bn Interest Payment to Chinese IPPs, Seeks Waiver Amid IMF Talks
Islamabad – September 28, 2025:
Pakistan has informed the International Monetary Fund (IMF) that it will not pay Rs220 billion in interest charges to Chinese independent power producers (IPPs) under the China-Pakistan Economic Corridor (CPEC). Instead, Islamabad intends to seek a waiver from Beijing while assuring the IMF of its commitment to power sector reforms.
During the second round of IMF review talks, the Power Division briefed the Fund on the state of the energy sector. Officials confirmed that while Pakistan recognizes Rs250 billion as principal dues for purchased electricity, it rejects the Rs220 billion late payment surcharge. These disputed dues are part of the Rs1.7 trillion circular debt crisis.
Energy ministry sources said the IMF was informed that another Rs500 billion would be added to circular debt in FY2025-26 unless the finance ministry injects Rs540 billion in subsidies. The IMF acknowledged Pakistan’s progress in reducing total circular debt from Rs2.42 trillion to Rs1.6 trillion by June 2025 but expressed concern about sustainability.
China, however, is expected to resist Islamabad’s stance. In recent CPEC discussions, Beijing emphasized that both countries had agreed not to alter energy payment agreements unilaterally. Since 2017, Pakistan has already paid Rs5.1 trillion to 18 Chinese power plants, covering 92.3% of billed amounts, including interest.
Beijing has urged Pakistan to operationalize a revolving account for electricity payments, as per the 2014 CPEC Energy Framework Agreement. Currently, the State Bank of Pakistan manages a Pakistan Energy Revolving Account with limited monthly withdrawals, leading to an outstanding debt of Rs423 billion.
Meanwhile, the IMF raised concerns about declining residential electricity demand, rising circular debt, and the impact of floods on fiscal stability. Officials responded that while household demand has dipped, industrial demand is increasing as factories shift from gas to the power grid.
The government continues to rely on heavy subsidies and new loans to manage debt in the power sector, while the gas sector’s circular debt has reached Rs2.6 trillion without any budgetary allocation. Officials also hinted at reopening the Qatar LNG deal due to underutilized LNG supply.
