The federal government has decided to bring the power sector’s circular debt inflow to zero during the current fiscal year, in line with International Monetary Fund (IMF) requirements for the release of a $1.2 billion tranche under the Extended Fund Facility (EFF), sources said on Thursday.
Debt Could Reach Rs2.35 Trillion Without Action
According to officials, Pakistan’s circular debt was expected to grow by Rs735 billion this year—rising from Rs1,615 billion to nearly Rs2,350 billion—if no corrective actions were taken.
However, the government has launched a series of measures intended to completely offset this projected increase and maintain zero net circular debt inflow, as required by the IMF.
Revenue-Boosting and Loss-Reduction Measures
Sources say several key interventions are expected to reduce the projected rise by Rs212 billion, including:
- Annual rebasing, generating Rs55 billion
- Lower DISCO losses, saving Rs18 billion
- Improved recovery rates, adding Rs121 billion
Government to Cover Remaining Gap Through Payments
To close the remaining Rs522 billion gap, the government plans to:
- Make principal repayments worth Rs120 billion
- Pay approximately Rs400 billion to government-run power plants and Independent Power Producers (IPPs)
These payments will help ensure that the overall circular debt stock does not increase this year.
IMF Firm on Zero Inflow Condition
Sources said the IMF has explicitly instructed Pakistan to maintain a zero circular debt inflow during the ongoing fiscal year as part of its structural reform commitments under the EFF.
With the combined impact of rebasing, efficiency improvements, and targeted repayments, officials remain confident that the government will be able to meet this requirement by year-end.
