Pakistan reduces circular debt by Rs800 billion in power sector: minister

ISLAMABAD: The Federal Minister for Energy Awais Ahmad Khan Leghari has announced a significant reduction of Rs 800 billion in Pakistan’s circular debt in the power sector.

In a video statement, the power minister said that since taking office, the government has managed to decrease the circular debt by approximately Rs800 billion from Rs2.4 trillion to Rs1.6 trillion.

“A new circular debt reduction scheme worth Rs 1225 billion will be implemented to further reduce the debt,” he added.

Leghari stated that consumers have been paying a debt service surcharge of about Rs3.25 per unit of electricity, which was previously only used to pay interest, leaving the original debt unchanged.

However, he added that under the new scheme, debt repayments will be covered by an already levied surcharge of Rs3.23, avoiding new charges for consumers.

He said that this circular debt is going to be settled without falling on the exchequer or on consumers.

The government aims to bring the circular debt to zero within the next six years, the minister added.

The finance ministry said that the plan was executed with the support of 18 commercial banks, coordinated through the Pakistan Banks Association, and backed by the State Bank of Pakistan.

The statement said the deal involves restructuring Rs660 billion ($2.31 billion) in existing loans and arranging Rs565 billion ($1.98 billion) in fresh financing to clear overdue payments to power producers.

“The success in reducing circular debt is attributed to the joint efforts of all institutions and the vision of the Prime Minister,” Leghari added.