Circular debt: Financial sector urged to help resolve crisis

proposals were presented including conversion of outstanding circular debt into long-term PIBs

KARACHI:

The State Bank of Pakistan’s (SBP) Acting Governor Yaseen Anwar on Monday underscored the role that the financial sector could play in resolving the ongoing energy crisis in the country, which is hampering business activities.

Anwar presided over the chief executives of banks meeting convened to resolve problems being faced by Independent Power Producers (IPPs) on Monday. He assured banks that SBP will facilitate them in case they require any regulatory support for early resolution of the circular debt crisis.

Abdullah Yusuf, representative of IPPs, identified factors behind the current crisis. He said that the government is considering short and medium term options for resolving energy crisis on a sustainable basis, which include possibilities like use of coal as a substitute to oil, gas import as raw material and construction of small hydel power projects.

The meeting concluded that issues being faced by IPPs are primarily driven by paucity of short-term liquidity. A number of proposals were presented including conversion of outstanding circular debt into long-term Pakistan Investment Bonds (PIBs).

Published in The Express Tribune, August 16^th, 2011.