ISLAMABAD: In a historic decision, the federal cabinet has approved a financing facility of Rs1.275 trillion from commercial banks to systematically eliminate the country’s long-standing circular debt in the power sector.
The loan, to be repaid over six years, carries what officials describe as the lowest interest rate ever, at KIBOR minus 0.9%. An annual repayment ceiling of Rs323 billion has been set, ensuring the expected fiscal outflow.
The funds will be used to clear the dues of Independent Power Producers (IPPs) and the outstanding dues of Power Holding Company Limited (PHL). A total of Rs683 billion will go directly towards PHL’s dues, while the remaining will be focused on IPP payments.
Cabinet sources stress that this financing plan does not impose any new burden on taxpayers, as it is fully integrated into the existing Debt Service Surcharge (DSS) of Rs 3.23 per unit, which is already reflected in electricity bills.
Officials believe that this financing measure will significantly reduce the circular debt, which currently stands at around Rs 2.381 trillion, and improve liquidity and investor confidence in the energy sector.
