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Pakistan’s Power Sector Grapples with Soaring Circular Debt, Reaches Rs 2.635 Trillion

A recent report from Pakistan’s power ministry reveals a daunting challenge facing the nation’s power sector: a staggering circular debt of Rs 2,635 billion as of January 2024. Despite notable increases in power tariffs and fuel adjustments, the circular debt has persisted in its upward trajectory.

Between June 2023 and January 2024, the circular debt ballooned by Rs 325 billion, reaching the alarming figure of Rs 2,635 billion. This surge is primarily attributed to the subpar performance of Distribution Companies (DISCOs) and their inability to collect sufficient revenue.

The International Monetary Fund (IMF) has pressed Pakistan to address this pressing issue in its power sector, advocating for measures such as raising electricity and gas prices as part of a proposed loan program. Pakistan has assured the IMF of its commitment to keep the circular debt at Rs 2.31 trillion.

During a session with the Senate Standing Committee for Power, officials from the Power Division reiterated that the circular debt had indeed stood at Rs 2.31 trillion as of June 2023. They affirmed the government’s determination to uphold this figure, signaling a concerted effort to tackle the burgeoning circular debt crisis.

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