ISLAMABAD STAFF REPORTER
Prime Minister Muhammad Shehbaz Sharif has termed the newly launched Circular Debt Financing Facility as a “major success” and the result of “collective national efforts.” Addressing the inauguration ceremony of the financial plan via video link from New York, the Prime Minister emphasized that tackling circular debt was a long-standing challenge that had been draining national resources.
He credited the task force, led by the Minister for Energy, for its dedicated work in negotiating with Independent Power Producers (IPPs) and formulating a strategy to curb the rising debt. “This initiative is a landmark in our journey towards energy sector reforms,” the Prime Minister stated.
Shehbaz Sharif noted that improving power distribution lines and controlling line losses remain significant challenges, especially as the government moves toward the privatization of power distribution companies in the next phase.
Referring to a recent meeting with the IMF Managing Director, the Prime Minister shared that she praised Pakistan’s rapid economic reforms and commitment to recovery. “For the first time, the IMF MD recognized Pakistan’s reform efforts as serious and effective,” he said. She also expressed solidarity in the aftermath of devastating floods and assured continued support.
The PM highlighted key indicators of economic improvement in areas like the Federal Board of Revenue (FBR), power, and information technology sectors. “With courage and determination, Pakistan can overcome its challenges,” he asserted, adding that credit for these achievements goes to “Team Pakistan.”
Key Features of the Plan:
The government of Pakistan has signed a landmark agreement with a consortium of 18 banks to launch a PKR 1.225 trillion Circular Debt Financing Facility. The plan aims to reduce circular debt in the energy sector over a period of six years without imposing any new Debt Service Surcharge (DSS) on consumers.
The financing will be provided at KIBOR minus 0.9%, and a portion of the amount—PKR 659 billion—will be used to retire existing loans of Power Holding Limited, while the rest will be allocated to pay dues to IPPs and GPPs (Government Power Producers). The initiative is projected to save consumers PKR 350 billion by eliminating expensive delayed payment surcharges.
Statements from Key Officials:
- Minister for Power, Owais Ahmed Khan Leghari stated that the circular debt had significantly impacted the energy sector and that this consensus-based scheme is a major reform effort.
- Finance Minister Muhammad Aurangzeb called the debt retirement scheme a critical milestone after a year of sustained efforts and added that it will have “far-reaching effects” on the energy sector.
- HBL President described the deal as a major opportunity, while Punjab Bank CEO Zafar Masud called the transaction historic for Pakistan’s banking sector. He emphasized that banks are not being unfairly burdened, and no additional surcharges are being introduced.
- Chairman Privatization Commission, Muhammad Ali, emphasized that the plan was finalized through extensive consultation, and that energy reforms under Minister Leghari’s leadership are moving in the right direction.
The official ceremony at the Prime Minister’s House was attended by federal ministers, senior officials, regulators, international partners, and CEOs from the power sector. The event marked a significant step toward Pakistan’s commitment to financial discipline and structural reform in the energy sector.
