Pakistan's energy sector circular debt reaches Rs 5,206 billion

The latest IMF report has revealed that the total circular debt of Pakistan’s energy sector has reached Rs 5,206 billion. Of this, the gas sector’s share is Rs 3,442 billion, while the electricity sector’s liabilities are Rs 1,764 billion.

This debt keeps increasing because there is a difference between the production cost of electricity and gas and the prices received. Subsidies, theft, transmission losses and payments to IPPs keep increasing this difference. The result is that state-owned companies are unable to pay each other’s debts and the debt keeps increasing.

To solve this problem, the government has assured the IMF of several strict measures. Regular adjustments in the tariff will continue, non-targeted subsidies will be phased out and an additional surcharge will also be imposed on electricity consumers to repay the original debt. The accumulated debts will be converted into liabilities of the Central Power Purchasing Agency.

Simply put, the burden of this circular debt will ultimately have to be borne by the common consumer because the government has promised the IMF to continue to increase the cost of electricity and gas.