Pakistan’s Power Sector Circular Debt May Surge by Rs. 735 Billion This Year

Pakistan’s power sector circular debt could increase by another Rs. 735 billion during the current fiscal year, potentially pushing the total from Rs. 1.615 trillion to as high as Rs. 2.35 trillion, sources told ProPakistani. According to sources, the government’s circular debt management plan aims to limit the increase through several measures. Rebasing electricity tariffs, reducing losses at distribution companies, and improving recoveries are expected to reduce the projected rise by Rs. 212 billion. To eliminate the remaining Rs. 522 billion in circular debt, the plan calls for Rs. 120 billion in principal repayments. Additionally, the government intends to inject Rs. 400 billion into state-owned power plants and independent power producers (IPPs) to maintain a zero stock of circular debt. In line with IMF requirements, the power sector must maintain zero net inflow of circular debt, sources said. The management plan anticipates Rs. 55 billion in annual revenue from tariff rebasing, Rs. 18 billion from reducing distribution company losses, and Rs. 121 billion from improved recoveries. If these steps are implemented, the government expects to maintain a zero net inflow of circular debt for the current fiscal year.