Circular debt soars past Rs4,177bn

Pakistan’s power sector circular debt has spiked to an alarming level of Rs4,177 billion as the government fails to stem system losses, sources said on Tuesday.

The circular debt of the energy sector is rising at the rate of about Rs129 billion per year. The surge in the outstanding debt stock due is significantly caused by the government’s inability to pay dues to independent power producers (IPPs).

The circular debt of the electricity sector has touched Rs2,277 billion, while Pakistan State Oil’s (PSO) debt has crossed Rs600 billion. The country’s national oil company has sought Rs80 billion from the finance ministry to save its letter of credit from defaulting.

Similarly, the circular debt of the gas sector has reached Rs1,400 billion, sources said, adding that the alarming increase in the debt might potentially affect the energy supply chain.

The alarming cash shortfall across the power sector supply chain – the inability of arrears to pay to the power supply chain – comes despite the continuous increase in the prices of electricity and cut in subsidy. Similarly, the authorities had also prepared plans to stop the increase in debt stock and liquidate existing arrears.