ISLAMABAD: The federal government has decided to bring the power sector’s circular debt inflow to zero during the ongoing fiscal year, a key requirement set by the International Monetary Fund (IMF) for the release of a $1.2 billion tranche, official sources said on Thursday.
According to the sources, Pakistan’s circular debt was expected to rise by Rs735 billion from Rs1,615 billion to nearly Rs2,350 billion by the end of the fiscal year if no corrective steps were taken. To counter this surge, the government has introduced multiple measures to ensure that the net addition remains zero, as demanded under the IMF’s Extended Fund Facility program.
Officials said the government’s main corrective actions include annual rebasing, which will bring in Rs55 billion, a reduction in DISCOs’ losses worth Rs18 billion, and improved recovery rates expected to generate Rs121 billion. Together, these steps will offset around Rs212 billion of the projected increase.
To bridge the remaining Rs522 billion gap, the government plans to make Rs120 billion in principal repayments and settle approximately Rs400 billion owed to government owned power plants and Independent Power Producers (IPPs). These payments are designed to prevent any net buildup in the circular debt stock.
Sources added that the IMF has clearly instructed Pakistan to maintain zero circular debt inflow throughout the fiscal year as part of its structural reforms.
With all planned measures including rebasing, loss reduction, improved recoveries, and targeted repayments the government aims to end the fiscal year with no net increase in the power sector’s circular debt.
