Circular debt rising by Rs45bn per month, NA panel told

ISLAMABAD: Pakistan’s circular debt is increasing by Rs45 billon per month due to continuous increase in payables and late payment surcharge.

The Ministry of Finance revealed this during a meeting of the National Assembly’s Standing Committee on Finance and Revenue, which was held on Friday under the chairmanship of MNA Faizullah.

Finance Secretary Kamran Ali Afzal briefed the committee on circular debt and its financial implication on the upcoming budget.

He said that Finance Division was working closely with the Power Division on a two-pronged strategy: debt stock and capping the debt flow.

“Government intends to covert Power Holding Private Limited’s debt of Rs806 billion into public debt, which would be paid over the next five years. Similarly, Rs72 billion would be paid to lending banks during the current financial year; an amount of Rs28 billion has already been paid in this regard,” he added.

The committee was further informed that the incumbent government has arranged Rs400 billion funding through Islamic financing to clear the debt stock. In addition, the finance ministry had also released Rs226 billion last year and Rs52bn during the current fiscal year under the category of budgetary allocation of tariff differential that benefited 1 to 300/units category of consumers.

The secretary said that the government has decided to settle the payable customs’ duty of over Rs1,300 billion by taking certain measures such as engaging IPPs for a voluntary reduction in tariff and settlement of outstanding amount as of November 2021 (Rs500 billion) in two tranches: 40pc in the next 3-4 weeks and 60pc in August.

Besides this, the Circular Debt Management Plan (CDMP) implementation was also in the offing to offset the negative impact of CD on the economy inter alia with the key pillars.

The committee members expressed grave concerns about the policies adopted by the government and loopholes of its implementation with regard to preventing the spread of circular debt.

They were of the view that the increase in circular debt will create huge problems for the economy, especially towards the smooth functioning of the industries. After detailed discussion, the committee unanimously decided that Power Division may be invited to the next meeting for further deliberations in this regard.

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