Islamabad: A Chinese firm has demanded payment of over Rs 86 billion from Pakistan on an immediate basis. China Huaneng has served notice of non-payment to Pakistan's Central Power Purchasing Agency Guarantee (CPPA-G) pursuant to guarantee within 30 days, reported Business Recorder.

The company, in a letter written on July 15, 2022, had made a demand for payment.

In a letter to Managing Director, Private Power & Infrastructure Board (PPIB), the Chinese company's Vice President, Fan Jinda said that pursuant to section 1.5.1 of the guarantee signed between Huaneng Shandong Ruyi (Pakistan) Energy (private) Limited (HRS) and PPIB on January 23, 2017, HRS is notifying the government of Pakistan through PPIB about non-payment by the CPPA-G of the overdue amount of over Rs 86 billion, reported Business Recorder.

The company has cautioned CPPA-G that in case the overdue amount is not settled within 30 days from the submission of the letter, it will have no alternative but to demand the amount from the government of Pakistan under the guarantee.

According to HRS, the total amount of overdue invoices on account of energy payments and capacity payments as of July 14, 2022 was Rs 70,889,690,499 with an additional amount pertaining to delayed payment interest being Rs 15,387,545,709. Thus, the overall overdue amount is Rs 86,277,236,208, reported Business Recorder.

"Settle the entire overdue amount of Rs 86,277,236,208 on an urgent basis," said Vice President HRS, warning that consequences/damages of any shut down of the power plant due to inadequate coal will need to be borne by CPPA-G.

The company has also shared its letter with the Chinese embassy in Islamabad, Chairman CEPC Authority and other senior officials of concerned ministries.

Pakistan has been reeling under heavy economic turmoil and it is hoping that its all-weather ally China will come to its rescue however eminent economists differ, saying expectations from Beijing are highly misplaced.

The Council on Foreign Relations (CFR), a body that tracks sovereign default risk, recently placed Pakistan's scoring at 10 (indicating 50 per cent or higher chances of defaulting), equivalent to countries such as Sri Lanka, Ukraine, Russia, Venezuela, Argentina, Ghana, Tunisia. Some of these nations have already defaulted, reported Dawn.

Moreover, amid renewed political volatility, the Fitch Ratings agency on Tuesday downgraded Pakistan's outlook from stable to negative.

In a statement, the credit rating entity affirmed the Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) at 'B-'.

"Pakistan's 'B-' rating reflects recurring external vulnerability, a narrow fiscal revenue base and low governance indicator scores compared with the 'B' median," said Fitch, adding that external funding conditions and liquidity will likely improve with the new staff-level agreement, reported Business Recorder.

The move comes in view of the significant deterioration in the country's external liquidity position and financing conditions since early 2022.