Power Sector’s Debt To End in Next Six Years

The minister for the power division, Awais Leghari, said on Friday that circular debt would be completely ended within the next six years.

Meanwhile , he further said that consumers will have to pay Rs 3.23 per unit to retire debt in the next five to six years.

While addressing a press conference, he said that circular debt had been reduced to Rs 1.64 trillion.Energy stocks surge on circular debt deal hopes

“Within six years, the circular debt will cease to exist, says Awais Leghari said, adding that the surcharge of Rs3.23 is being collected from consumers.

“Now, this surcharge of Rs3.23 will also end within 5 to 6 years, says Awais Leghar,i adding that the circular debt will be permanently eliminated.

Owais Leghari says govt cuts circular debt by Rs 780 bn in one year

He claimed that the government had successfully reduced Pakistan’s power sector circular debt by Rs780 billion within a year.

Leghari said circular debt had become a chronic burden on the economy which swelled from Rs1.1 trillion at the end of the PML-N government in 2018 to Rs2.25 trillion by 2022. When the current coalition took office, the figure stood at Rs2.4 trillion,” he said.

“Through tough reforms and negotiations, we have brought it down to Rs1.64 trillion by June,” he said. 

“This includes Rs363bn in savings from talks with IPPs, Rs242bn saved from curbing losses, and Rs175bn in savings due to lower interest rates after the economy began to stabilise,” he said, adding that the government had entered into a landmark agreement with a consortium of 18 banks to restructure Rs1.225 trillion worth of circular debt under more favourable terms. 

He claimed the deal ensured an interest rate saving of 3.5 to 5.5 percent and would eventually wipe out the circular debt within six years. 

“This is a historic step. The surcharge of Rs3.23 per unit currently being collected from consumers will also end within five to six years instead of the eight to ten years originally projected,” Leghari said.

“We have discussed the plan in detail with the IMF, and it has been incorporated into our programme targets. Today again, we spoke to the IMF mission in Islamabad about progress,” he said.

Leghari further said that the debt resolution would strengthen Pakistan’s macroeconomic stability. He said no other economy in the world carried such a recurring burden of circular debt. “By reducing it, we are not only stabilising the energy sector but also creating fiscal space for agriculture, SMEs, housing, education, and health,” he added.

The minister said power distribution companies (DISCOs) had also started showing improvement. Their boards are now focusing on reducing losses. He said that industries were receiving electricity at 38 percent lower rates. As many as 18 million domestic consumers which account for around half of the country’s households, were benefiting from reduced tariffs.

He further said that solar net-metering tariffs had created “a dangerous imbalance,” and warned that rates need to be reviewed. “If adjusted, it could reduce electricity bills for over 32 million people,” he said, adding that reform in this area was necessary to ensure fairness across consumer segments.

Leghari said that circular debt would be eliminated “once and for all” through sustained reforms. “Pakistan’s economy depends on its energy sector. By resolving circular debt, we are laying the foundation for long-term growth and stability,” he added.