Islamabad: Pakistan’s power sector circular debt may rise by Rs 735 billion during the current fiscal year, pushing the total to around Rs 2,300 billion, sources said. The increase is partly due to rebasing adjustments, while reduced losses in distribution companies and improved recoveries could limit the rise by Rs 212 billion.
Authorities plan to reduce Rs 522 billion of the existing debt through Rs 120 billion in principal repayments and Rs 400 billion payments to government power plants and IPPs, maintaining stock at zero. The IMF has required that circular debt inflows remain at zero, and the circular debt management plan anticipates Rs 55 billion from annual rebasing adjustments.
Read more: IMF aims to maintain zero circular debt inflow this fiscal year
Distribution companies’ losses are expected to fall, generating Rs 18 billion in savings, and improved recoveries could yield Rs 121 billion. These combined measures aim to stabilize the debt under a zero-inflow approach for the fiscal year.
Officials stressed that effective debt management and timely payments to power producers are crucial to maintaining sector stability. Without strict implementation, circular debt could spiral further, impacting electricity tariffs and fiscal stability.
Read more: Power sector circular debt rises by Rs79bn
The government’s measures reflect ongoing efforts to comply with IMF conditions, reduce power sector liabilities, and prevent further accumulation of circular debt that burdens the economy.