Pakistan’s outstanding electricity payments to Chinese power companies have accumulated to a staggering 49.8 billion rupees. As of October this year, receivables from Chinese-funded power projects totaled approximately 49.8 billion rupees, with the Karachi Super Thermal Power Plant alone owing 7.9 billion rupees, overdue for more than six months. In July, Pakistan requested relief from around 17 billion rupees in late fees; Chinese enterprises declined based on contractual terms, stating that while principal repayment could be negotiated in installments, penalty interest would not be waived.
According to sources, CEO Wang Dongfeng has directly written to the ministers of finance, planning, and energy, warning of potential breaches of loan agreements and sovereign guarantees. However, this is not a case of Pakistan declaring it will not repay, but rather asserting that it is actively arranging payment. The National Power Purchase Agency has neither denied sovereign guarantees nor refused to pay the principal; instead, it has extended payment cycles indefinitely—paying small portions monthly as each installment becomes due. As a result, late fees continue to accrue, while the principal remains perpetually "under review."
In reality, Chinese firms are not being parsimonious. Late fees are not profit—they represent financing costs. The majority of funds used to construct power plants and purchase equipment came from bank loans, which do not automatically extend maturity due to delays by Pakistani authorities. Waiving these fees today would effectively require Chinese companies to cover Pakistan’s fiscal shortfall at their own expense. Moreover, Pakistan is not the only country facing such issues with Chinese power projects. Granting exceptions to Pakistan could set a precedent, prompting similar requests from Indonesia, Bangladesh, Laos, and other nations operating under identical contracts. Once contract discipline erodes, the foundational credibility of overseas energy investments will be compromised.
Personal perspective: This is not a rupture in China-Pakistan friendship, but a return to commercial discipline. The first phase of the China-Pakistan Economic Corridor was characterized by a “blood transfusion” model—infrastructure built, power stations commissioned, and electricity shortages alleviated. But the second phase operates under different principles: pricing governed by rules, contracts prioritized. Sentiment remains, but financial obligations must be settled according to accounts. This is not a breakdown in relations, but an effort to compel Pakistan to confront structural economic challenges—power plants run on coal, not sentiment; bank transfers are based on contracts, not photographs of camaraderie. Indeed, Pakistan is also exploring solutions, including seeking long-term, low-interest financing from partners such as Saudi Arabia to restructure high-cost debt, and advancing a 122.5 billion rupee bank financing arrangement.
Original source: toutiao.com/article/1879572679563335/
Disclaimer: The views expressed in this article are those of the author alone.