Pakistan Circular Debt Plan: AGP Urges Power Division to Present Strategy
Pakistan’s Pakistan circular debt plan has entered a new phase after fresh concerns about the growing power sector liabilities. The Auditor General of Pakistan (AGP) has asked the Power Division to present a clear strategy. Officials must now explain how they will control the rising circular debt.
Earlier estimates suggested that the government would reduce circular debt to Rs1.2 trillion by June 2027. However, authorities have revised the target to Rs1.346 trillion.
Circular Debt Target Revised
Circular debt stood at Rs2.393 trillion on June 30, 2024. The government planned a steady decline over the next three years. However, new financial pressures forced officials to adjust the target. As a result, policymakers now aim to bring the amount down to Rs1.346 trillion by June 2027.
Experts say the change reflects ongoing challenges in Pakistan’s energy sector. For example, weak bill recovery and high system losses continue to increase financial stress.
Government Injects Rs200 Billion
To manage the situation, the government approved a major financial move. Authorities granted a Technical Supplementary Grant worth Rs200 billion. This decision aligns with commitments made to the International Monetary Fund (IMF). Therefore, the funding helps maintain circular debt within the agreed limits. Officials designed the Rs200 billion support as an equity investment. The funds will strengthen the finances of power distribution companies.
Support for Power Distribution Companies
The investment will go directly into state owned power distributors. These firms are commonly known as Power Distribution Companies or DISCOs. Many DISCOs face serious cash flow shortages. As a result, they struggle to pay power producers on time.
The equity injection aims to ease this pressure. In addition, officials hope it will stabilize the electricity supply chain. Energy analysts say structural reforms remain essential. Without better governance and improved bill recovery, circular debt may rise again. Therefore, the Pakistan circular debt plan will depend on stronger oversight and long term energy reforms.
