Amidst mounting concerns over the power sector’s circular debt, the executive committee of the Special Investment Facilitation Council (SIFC) has directed to seek approval from the International Monetary Fund (IMF) to settle outstanding debts.
The Express Tribune reported that this decision comes after the Ministry of Finance’s reluctance to provide Rs745 billion for immediate cash injection and to start the settlement process.
Pakistan’s energy sector is grappling with soaring circular debt, which has reached a staggering Rs5.73 trillion.
The breakdown shows that the power sector’s dues have surpassed Rs2.7 trillion, while the gas sector owes over Rs3 trillion.
Caretaker Prime Minister Anwaar-ul-Haq Kakar, on January 24, demanded swift and decisive action from the Ministry of Energy, stressing an urgent, and long-term strategy to reduce the spiraling debt in the energy sector.
The Ministry of Energy’s settlement plan of Rs 1.27 trillion will affect the budget by Rs 902 billion. Out of this, Rs556 billion, or 62%, will go to OGDCL.
The settlement plan aims to pay off over Rs 1 trillion of the gas sector circular debt, which involves stock market-listed companies.
The rest of the Rs250 billion will be used to reduce the power sector circular debt of Rs 2.7 trillion.
The plan requires an extra grant of Rs745 billion and approval from boards of the power and gas companies.
The SIFC has asked the concerned ministries to submit the Rs1.27 trillion circular debt clearance proposal to the IMF for approval this week.