The government has taken an important step to meet the requirements of the International Monetary Fund (IMF) loan program by approving the Circular Debt Management Plan for this fiscal year.
The Economic Coordination Committee (ECC) has granted initial approval, with the final endorsement expected from the federal cabinet.
According to documents from the Ministry of Finance, the new plan aims to cap the circular debt increase at Rs36 billion. Last fiscal year, circular debt reached Rs2,393 billion. In its agreement with the IMF, the government committed to keeping circular debt below Rs2,310 billion; however, without intervention, estimates for this year indicate a potential rise to Rs1,077 billion.
To control this debt, the government has proposed several strategies, including timely electricity tariff adjustments, efforts to minimize line losses, and targeted subsidies. The report emphasizes that the plan will curb the growth of circular debt.
The document notes that similar initiatives have been effective in recent years, helping to avoid a Rs27 billion increase in 2022 and saving Rs57 billion in 2023. “In the previous fiscal year, the circular debt increased by Rs83 billion,” the report indicates.
Prepared based on NEPRA’s estimates, the Circular Debt Management Plan for the current year also highlights that unchecked debt growth could hinder power generation and transmission, slowing economic progress.
The document stresses the need to improve efficiency to address the circular debt issue effectively.
The report outlines key contributors to circular debt, including low revenue collection from distribution companies (DISCOs), line losses, unpaid generation costs, and high interest rates on loans. Additionally, the plan includes budget provisions from the finance division to ensure necessary financial resources are allocated.
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