Pakistan’s Circular Debt
The Ministry of Energy’s latest circular debt report reveals a concerning 2.5% year-on-year increase, adding an additional Rs57 billion to the staggering Rs2.31 trillion in circular debt in Pakistan’s energy sector as of June 2023.
Reduction in Short-Term Debt
Although there is a month-to-month decrease in circular debt, with a decline of Rs336 billion from May 2023’s Rs2.65 trillion, experts caution that the long-term problem remains a serious concern.
This drop is largely due to the Federal Board of Revenue (FBR) withdrawing Rs5 billion in April 2023. Furthermore, Rs21 billion has been released to settle outstanding claims from the previous year.
Delays Caused by Disputes with K-Electric
The ongoing subsidy dispute between the government and K-Electric (KE) contributes significantly to this mounting debt.
As of June 2023, KE still owes a substantial Rs346 billion, adding complexity to the circular debt crisis. Resolving this dispute is essential for stabilizing the financial health of the energy sector.
Government’s Efforts to Address the Issue
While the circular debt issue remains substantial, the government has taken action by injecting Rs162 billion into the energy sector through fiscal measures, demonstrating a commitment to addressing the problem.
However, it is evident that addressing this persistent challenge requires more comprehensive solutions, given the remaining circular debt of Rs57 billion.
The circular debt problem has long plagued Pakistan’s energy sector, and despite some short-term relief, the latest data emphasizes the necessity for a sustainable and lasting resolution to ensure the stability of the nation’s power supply and the financial health of its energy producers.
