Govt proposes plan to retire circular debt, reduce power prices with help of provinces

KP refuses to share the burden; IMF’s endorsement is also pending

The federal government has proposed a new plan to retire mammoth circular debt and to reduce electricity prices by Rs6 per unit with the help of all four federating units. 

According to a news report, the plan involves an Rs2.7 trillion funding scheme and the government is trying to persuade the International Monetary Fund (IMF). However, the plan, which relies on uncertain and risky funding sources, has not yet received the IMF’s endorsement.

The plan includes measures such as renegotiating terms with independent power producers (IPPs), shutting down inefficient plants, and retiring Rs2.7 trillion in circular debt. The government has informed the global lender that Rs1.4 trillion of the required funds would come from the four provinces. 

But, the KP government seems to be reluctant to contribute to this scheme. KP Finance Adviser Muzzammil Aslam said that the province is already producing electricity at much lower rates but faces exorbitant consumer prices, further justifying its refusal to fund the federal plan.

The proposal also includes further cuts to the Public Sector Development Programme (PSDP), additional commercial loans, and reallocating dividends from government-owned companies. 

However, the IMF has raised questions about the feasibility of these funding sources, particularly regarding the lack of provincial consensus and the impact on long-term financial stability. It has also requested more details before considering approval.

The plan’s success hinges on securing cooperation from the provinces and resolving issues like line losses, electricity theft, and poor recovery of subsidies. As discussions continue, the federal government remains hopeful but uncertain about securing immediate IMF approval, especially given the delay in finalizing Pakistan’s $7 billion bailout package.

Monitoring Desk
Monitoring Desk
Our monitoring team diligently searches the vast expanse of the web to carefully handpick and distill top-tier business and economic news stories and articles, presenting them to you in a concise and informative manner.

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