Govt to cut circular debt to Rs561 billion

The federal government is planning to cut the power sector’s circular debt from Rs2.381 trillion to approximately Rs561 billion by using Rs1275 billion secured through loans from 18 commercial banks, following approval from the International Monetary Fund (IMF).

According to reports, the Central Power Purchase Agency (CPPA-G) will use the funds to pay off Rs683 billion in loans taken by Power Holding Limited (PHL), along with Rs569 billion in interest-based dues owed to independent power producers (IPPs). Once these payments are made, the updated circular debt figures will be shared on the official website of the Power Division.

Officials say that the Power Sector Task Force also played a key role in reducing costs by negotiating Rs387 billion in waivers related to late payment interest with IPPs. Earlier, the government had already cleared Rs348 billion in payments — Rs127 billion through budget support and Rs221 billion by CPPA-G. Even after the current payment, a total of Rs561 billion will remain as circular debt. This includes Rs224 billion in non-interest liabilities and Rs337 billion in interest-based debt.

To pay back the total Rs1275 billion loan, consumers will continue paying the existing surcharge of Rs3.23 per unit for the next six years. This charge is part of the Debt Service Surcharge (DSS), which is already being collected in electricity bills. To pay back the total Rs1275 billion loan, consumers will continue paying the existing surcharge of Rs3.23 per unit for the next six years. This charge is part of the Debt Service Surcharge (DSS), which is already being collected in electricity bills.