Circular debt crisis

Circular debt to exceed Rs2.4 trillion by 2025, highlighting inefficiencies and failure in Pakistan's power sector.

It appears no amount of rate increases can rein in, let alone reverse, the pace of increase in circular debt, as new government data says total debt will rise past Rs2.4 trillion by the middle of 2025.

Despite additional revenue, the government has still not addressed some significant problems, including electricity theft and inadequate bill recoveries, estimated at Rs637 billion for the current fiscal year.

This glaring inefficiency underlines a systemic failure. No amount of price hikes or allocated subsidies - pushing a total of Rs1.2 trillion - seems to stem the tide of rising debt, reflecting a government that can't even succeed at playing catch-up with the problem.

While the ECC lauds the Circular Debt Management Plan as a pathway to financial sustainability, it is evident that the key assumptions underlying this plan are dubious at best. With unwarranted assumptions like a Rs300 per dollar exchange rate and an 18.44 per cent interest rate, the plan places an undue burden on consumers while risking further chaos in our economy.

The government's backbreaking price hike policy also shows a reliance on short-term fixes rather than a robust reform strategy focused on efficiency and accountability.

The average base electricity rate is projected to climb by about Rs5 by next summer, further straining consumers and punishing them for the power sector's own inefficiency, mismanagement and corruption.

Meanwhile, Power Minster Awais Leghari's recent claim that circular debt did not rise in the last year is now demonstrably false. The government needs to quickly begin increasing bill recovery through punitive measures if necessary, while 'line losses' and power theft need to be prosecuted in ways that actually scare people from indulging in the practice.

Distribution companies should also be taken to task instead of being allowed to rely on federal support. The time for substantive change is now, before we find ourselves in an even deeper crisis, where the lights - both literally and metaphorically - are dimmed for good.