ISLAMABAD: The federal cabinet, chaired by Prime Minister Shehbaz Sharif, has approved a Rs1.275 trillion loan to address the persistent circular debt crisis in Pakistan’s power sector.
This landmark financing plan involves securing funds from commercial banks at interest rates 0.9% below the historical three-month KIBOR benchmark, offering a cost-effective solution to the long-standing problem.
Strategic Move to Reduce Debt
Unlike previous policies focused on maintaining circular debt at fixed levels, this plan targets gradual reduction of debt by repaying dues owed to Independent Power Producers (IPPs) and clearing liabilities of the Power Holding Company.
Rs683 billion of the loan will be allocated specifically to settle arrears of the Power Holding Company.
The repayment is structured over six years, divided into 24 quarterly installments, helping stabilize the power sector without straining the national budget.
Repayment Terms and Financial Stability
The loan repayment cap is set at Rs323 billion annually, with an overall limit of Rs1.938 trillion to accommodate possible interest rate fluctuations.
This approach marks a shift towards a more sustainable financial strategy, aiming to restore confidence in Pakistan’s energy industry and improve power supply reliability.
