The circular debt in the power sector has exceeded Rs2.63 trillion in the first seven months of the current fiscal year, surpassing the government’s target of Rs2.31 trillion. Despite tariff adjustments and efforts to reduce the debt, it continued to rise, with a net increase of Rs325 billion.
The latest data released by the Power Division of the Ministry of Energy revealed that the circular debt increased by Rs84 billion in January 2024, reaching Rs2.63 trillion compared to Rs2.55 trillion in December 2023. The report highlighted that distribution companies were the main contributors to the debt increase, causing a rise of Rs284 billion in seven months.
The government’s negotiations with the IMF for a bailout also shed light on the pressing need to address the energy sector’s viability. The IMF emphasized the importance of reducing disparities in natural gas prices, implementing cost reductions, and accelerating structural reforms in the power sector to ensure sustainability.
It is evident that immediate action is required to tackle the circular debt crisis and stabilize the power sector for sustainable growth in Pakistan’s economy.
Published in Dawn, May 20th, 2024
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