Pakistan Resists IMF Pressure to Cap Circular Debt at Rs. 200 Billion

Pakistan has informed the International Monetary Fund that it expects power sector losses to surge to Rs. 535 billion this fiscal year, a 35% increase from last year, as inefficiencies and poor bill recoveries continue to drive up the country’s chronic circular debt.

According to Express Tribune, the Power Division informed the IMF that the flow of circular debt, or unpaid obligations that accumulate across the electricity supply chain, could rise by Rs. 505 billion this year, well above the Rs. 200 billion ceiling sought by the lender.

The projected losses are driven by two main factors: inefficiencies in power companies, which are expected to add Rs. 276 billion to the total, and under-recovery of electricity bills, which could contribute another Rs. 260 billion, nearly double the figure from last year.

Officials attributed the sharp increase in under-recoveries to the impact of floods and other external shocks.

Despite repeated efforts by both civilian and military leaders to reform the sector, including renegotiations with independent power producers, Pakistan has struggled to address the root causes of its power sector woes.

The government has relied heavily on budgetary subsidies and new borrowing to contain the circular debt, which stood at Rs. 1.6 trillion in June, down from Rs. 2.42 trillion a year earlier, largely due to one-off measures.

The IMF pressed Pakistani authorities to explain why early improvements in July and August, when losses from inefficiencies and weak recoveries fell 37% year-on-year to Rs. 153 billion, could not be sustained for the rest of the fiscal year. Officials cited limited room for further gains, especially after floods hit Punjab, and said the sector’s structural problems remain unresolved.

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Pakistan has informed the International Monetary Fund that it expects power sector losses to surge to Rs. 535 billion this… Read More

The post Pakistan Resists IMF Pressure to Cap Circular Debt at Rs. 200 Billion appeared first on ProPakistani.