Resurfaced circular debt threatening the economy: PEW

The Pakistan Economy Watch (PEW) on Sunday said the circular debt has again resurfaced and is threatening the fragile national economy.

The infamous power sector debt has surpassed Rs1300 billion and there is no way in sight to tackle it which is adding to the problems of the government, it said.

The government has decided to issue Rs200 billion Sukuk bonds to handle the debt which will calm down the issue for a year or two but not resolve the problem, said PEW president Dr Murtaza Mughal.

He said that past governments have promised reforms in the power sector but did nothing concrete while a former finance minister announced to bury the debt forever in 2013 but left it unresolved before leaving the country to avoid accountability.

The incumbent government had promised to resolve the issue of circular debt during the election campaign and now it should come up to its promise, he added.

Dr Murtaza Mughal said that the government has decided to issue Sukuk bonds against the 43 assets of power generation and distribution companies which will not only help it handle the problem and also help boost the Islamic finance industry.

Six Islamic banks have completed most of the spadework and only minor irritants have been left to be removed before the launch of bonds, he added.

The market share of Islamic banking industry stands at 13.6 per cent of total banking assets. The industry has grown over twenty percent during the last five years but it is yet to make major advances.

The increasing role of Islamic banks in the overall banking sector and their potential for providing strength to the economy must be appreciated, he demanded.

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