ISLAMABAD: The government will sign a financing facility agreement today aimed at reducing the mounting circular debt in the power sector, the Prime Minister’s Office (PMO) announced.
The Central Power Purchasing Agency (CPPA) invited CEOs and senior executives of banks and power companies to attend the ceremony, which will be held at the PMO. Prime Minister Shehbaz Sharif, currently in New York for the UN General Assembly session, will virtually address the gathering.
Pakistan’s debt crisis continues to weigh heavily on its economic outlook. According to the State Bank of Pakistan, the total government debt (excluding IMF liabilities) jumped from Rs69 trillion in June 2024 to Rs78tr by June 2025, while public debt (including IMF loans) rose to Rs80.5tr from Rs71.2tr in the same period.
To ease the circular debt, now standing at Rs2.3tr, the government has negotiated with 18 commercial banks to borrow Rs1.2tr — slightly below the originally planned Rs1.275tr. The loan will be repaid over six years through a Debt Service Surcharge (DSS) levied on electricity bills.
Bankers noted that the government had been borrowing less than the maturity amount of treasury bills during FY25, causing an increase in outstanding amounts. The new facility, they said, is expected to ease the financial strain on the sector.
Story by Tahir Sherani
