BeNewz
Related Articles
A consortium of 15 banks has agreed to lend the federal government Rs 1,272 billion to help eliminate further piling up of circular debt in the power sector.
According to details, the consortium is prepared to provide the loan at an interest rate 0.9% lower than the market rate. The agreement is expected to be signed either today or tomorrow. Currently KIBOR is offering at 12 %.
The banks have accepted the government’s proposal to offer the loan on easy terms. The loan will be provided to the Power Holding Company for a period of five years, with the possibility of extension.
The government intends to use this loan to prevent any further accumulation of the circular debt. At present, out of the total Rs 2,531 billion in circular debt, Rs 683 billion is solely attributed to interest payments.
This interest burden costs the public approximately Rs 3.23 per unit of electricity. Under the proposed scheme, the banks will be repaid through a surcharge, which is planned to be gradually reduced to zero in the future. The Federal Government is also collecting various surcharges on electricity consumers as well.
The government will contribute Rs 111 billion to the Power Holding Company from its own fiscal space. Additionally, savings of Rs 190 billion are expected through reduced distribution company (DISCO) losses and line losses.
After the disbursement of the loan by the banks, the circular debt stock is projected to shrink to just Rs 300 billion.
It is worth mentioning that the sitting government has assured the International Monetary Fund (IMF) that it will reduce the circular debt in the gas and electricity sectors to zero by the end of this year.
As of January 2025, the circular debt in the power sector stood at Rs 2,444 billion, while in the gas sector, it amounted to Rs 2,294 billion as of June 2024. These figures represent 2.1% and 2.2% of the Gross Domestic Product (GDP), respectively.
This commitment was made by the Prime Minister during technical and policy-level discussions with the IMF, held in Islamabad from February 24 to March 14, as part of the ongoing reforms in the energy sector.
