The long-standing issue of circular debt in Pakistan’s energy sector has taken an alarming turn, with the newest numbers suggesting that it has risen to a staggering Rs2.31 trillion as of June 2023.
According to the Ministry of Energy’s most current circular debt report, this represents a worrying 2.5% year-on-year growth, equivalent to an additional Rs57 billion compared to the same period in 2022.
Decrease in short-term
While there appears to be a monthly decrease in the circular debt, with a decrease of Rs336 billion from May 2023’s Rs2.65 trillion, experts warn that the long-term situation remains a severe concern.
This decrease is mostly due to the Federal Board of Revenue (FBR) withdrawing Rs5 billion in April 2023. Furthermore, Rs21 billion has been released in respect of pending claims from the previous year.
Dispute delays from K-electric
The ongoing subsidy dispute between the government and K-Electric (KE) is one of several causes leading to this increasing debt.
As of June 2023, KE still owed Rs346 billion, worsening the revolving debt crisis even further. The outcome of this issue is critical to the financial health of the energy sector.
Govt’s efforts to tackle issue
While the circular debt problem persists, the government has not been idle. They have committed to addressing the problem by injecting Rs162 billion into the energy sector through fiscal measures. However, with Rs57 billion in outstanding circular debt, it is clear that more comprehensive solutions are required to address this ongoing issue.
The circular debt problem has long been a thorn in the side of Pakistan’s energy sector, and despite some short-term relief, the latest data underscores the need for a sustainable and lasting resolution to ensure the stability of the nation’s power supply and the financial health of its energy producers.