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Power Sector Circular Debt Reaches Rs2.63 Trillion

Power Sector Circular Debt Reaches Rs2.63 Trillion

Government’s Commitment to IMF Challenged by Rising Debt

MULTAN

The circular debt in Pakistan’s power sector has surged to Rs2,635 billion as of January 2024, despite previous government assurances to the International Monetary Fund (IMF) to keep it at Rs2.31 trillion.

Escalation in Circular Debt

A recent report from the Power Division indicates a significant increase in circular debt. Despite hikes in power tariffs and fuel adjustments, the debt has risen by Rs325 billion since June 2023, when it was recorded at Rs2,310 billion.

Contributing Factors

The report attributes the growing debt to poor performance and low collection rates by Distribution Companies (DISCOs). These inefficiencies have contributed to the escalating debt, despite efforts to mitigate it through tariff increases.

IMF’s Conditions and Government Assurance

The IMF has pressured Pakistan to reduce circular debt and raise electricity and gas prices as part of the conditions for a new loan program. The Pakistani government had assured the IMF that it would maintain the circular debt at Rs2.31 trillion.

Senate Standing Committee for Power Discussions

Officials from the Power Division confirmed to the Senate Standing Committee for Power that the debt was managed at Rs2.31 trillion as of June 2023. However, the subsequent rise to Rs2.635 trillion highlights ongoing challenges in controlling the sector’s financial liabilities.

 
 

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