- Payables to power producers stand at Rs1.608tr.
- Total circular debt hovers around Rs2.381tr.
- Losses due to issues with Discos recorded at Rs170bn.
ISLAMABAD: In their bid to address the country’s Rs2.381 trillion circular debt, government functionaries are in talks with banks to finalise the term sheet for borrowing Rs1,240 billion, The News reported on Monday.
Top officials privy to the development have said tha the discount rate has tumbled to 12% from 22 %.
“In the time to come, the discount rate may further go down. The authorities want to take advantage of the situation and borrow the amount of Rs1.242 trillion,” said an official, adding that the relevant authorities are engaged with banks and want to finalise the term sheet prior to the arrival of the International Monetary Fund (IMF) mission.
The development comes against the backdrop of two IMF missions set to visit Pakistan in the coming weeks.
The first mission will focus on discussions regarding climate finance, while the second will carry out the first review of the country’s progress under the $7 billion Extended Fund Facility (EFF).
Expanding on the government’s talks with the banks, the official revealed that State Bank of Pakistan (SBP) governor and finance minister part of the talks.
He noted that the the government functionaries want to borrow Rs1,240 billion on the interest rate of 6-7% for seven years. However, the banks want to lend loans at a KIBOR+1 rate.
“Once the term sheet is finalised, the government will borrow loans from banks for seven years which will be paid back by electricity consumers through current debt servicing surcharge of Rs3.23 per unit in the tariff,” the official said.
The official said out of Rs2.4 trillion, almost Rs720 billion has already been settled by paying the past dues of six independent power producers (IPPs) whose contracts got terminated and 15 IPPs whose power purchase agreements are switched on the “take and pay” model.
The authorities have settled with IPPs the amount of Rs450 billion (Rs300 billion is paid and Rs150 billion in the head of LPS is waived off). And Rs286 billion dues of Wapda have also been settled with no interest payments.
“If the circular debt is resolved, it will ease out the power sector which is being opened to the private power market and distribution companies (Discos) are being privatised,” the official said.
According to the latest data about circular debt in the power sector till November 2024, the country’s circular debt has slightly tumbled from Rs12 billion to Rs2,381 billion during the July-November period of FY25 and from Rs2,393 billion in June 2024.
However, losses in the wake of Discos’ inefficiency and under-recovery stood at Rs170 billion (Rs94 billion on account of inefficiency and Rs76 billion because of under-recovery).
The payables to power producers stood at Rs1.608 trillion with loan amounts parked in the Power Holding Private Company (PHPL) stood at Rs683 billion.
However, the generation companies (Gencos) payable to fuel suppliers stood at Rs90 billion in the first five months of the fiscal year.
Data shows the budgeted but unreleased subsidies stood at Rs5 billion, while the interest charges on loans of PHPL and payments to IPPs stayed at Rs70 billion.
In the data of November 2024 uploaded on the Power Division’s website, it has also been highlighted pending generation cost under the head of QTA (Quarterly Tariff Adjustments) and FCA (Fuel Charges Adjustments) stood at Rs31 billion. Data also shows the amount of Rs11 billion was payable by K-Electric to CPPA.
