Islamabad, May 20: Despite the already soaring energy bills, defaults, power theft, and cancellation of subsidies, Pakistan’s energy sector’s circular debt has gone up to a staggering PKR 2.635 trillion, as per an official report by the Pakistan Power Ministry.
According to the report, the hike in circular debt continued despite the massive increase in power tariffs and fuel adjustments. The circular debt increase was recorded at PKR 2,310 billion till June 2023, showing an increase of PKR 325 billion during the seven months (January 24). The report stated that poor performance and low recoveries by the DISCOs (Distribution Companies) added to the increase in the circular debt.
Pakistan’s energy problems aren’t a new phenomenon as structural issues, poor planning, and substantial subsidies have resulted in huge inefficiencies across the power sector, affecting supply reliability and generating huge deficits, thus badly affecting the sector and creating huge losses.
Furthermore, the lack of resources and adequate infrastructure has exacerbated the problem only further. After recording a jaw dropping figure of PKR 5.1 trillion back in end January in regards to energy circular debt, Islamabad had clamped down on subsidies and imposed substantial tariffs though as of now, it hasn’t helped them much.
Technical inefficiencies within the state-owned electricity distribution companies, and their outdated metering practices led to faulty revenue collection, not fully covering the cost of electricity supply, leading to accumulating circular debt.
As part of its demands for the new bailout package, the IMF has ‘asked’ Pakistan to curtail circular debt of the power sector and increase electricity and gas prices for the fresh loan programme. In response, the Pakistani government complied with the IMF’s demands and assured them it’ll maintain the power sector’s circular debt at PKR 2.31 trillion.
In its report presented to the Senate Standing Committee for Power, the Power Division officials said that the circular debt stood at Rs2.31 trillion by June 2023 which would be maintained to avoid a further increase in debt.
The circular debt alone amounts to over 5% of GDP and is rising at a rate of over Rs135 billion per month.
