Power Sector Sees Major Financial Shift
The government is moving forward with a large-scale debt repayment plan aimed at reducing Pakistan’s power sector circular debt from Rs2.381 trillion to around Rs561 billion. This step comes as part of its commitment to the IMF.
According to the Power Division, the government will use Rs1,275 billion, borrowed from 18 commercial banks, to repay the debts of Power Holding Limited (PHL) and clear dues of independent power producers (IPPs). The Central Power Purchase Agency-G (CPPA-G) will handle the disbursement.
The CPPA-G is expected to repay Rs683 billion in loans taken by PHL and settle Rs569 billion in outstanding payments to power companies. Once completed, the remaining circular debt will stand at Rs561 billion.
Officials said this initiative has been made possible by the Task Force on Power Sector, which includes government advisers and regulators. The task force has negotiated a Rs387 billion waiver in Late Payment Interest charges, easing the financial burden. Another Rs348 billion was cleared using subsidies and CPPA funds.
However, Rs561 billion in debt still remains—comprising Rs224 billion in non-interest-bearing and Rs337 billion in interest-bearing liabilities. This amount, officials said, will be addressed through reforms and operational improvements in power distribution companies.
Consumers will not face any new charges, as the Rs1,275 billion loan will be paid off over six years through an already-existing surcharge of Rs3.23 per unit. Officials confirmed that while the cap on this surcharge was 10 percent, it has now been lifted under IMF conditions.
