The International Monetary Fund (IMF) has expressed ‘concerns’ over increasing circular debt in Pakistan’s power sector, sources said on Monday.
During the virtual talks with the IMF, Pakistan authorities shared the plan of an additional Rs100 billion increase in the circular debt in the power sector during the current fiscal year.
Sources indicate that by June 2025, the circular debt in the power sector is expected to surpass Rs 2,550 billion.
Currently, the circular debt has already exceeded Rs2,400 billion, prompting discussions with the global lender. The International Monetary Fund has expressed serious concerns over Pakistan’s inability to control this growing debt, the sources said.
Meanwhile, Pakistan has assured the IMF of timely tariff adjustments to manage the circular debt.
The IMF has demanded that the circular debt in the power sector should not exceed 2,500 billion rupees. However, sources reveal that even during the last fiscal year, the shared plan with the IMF to control the debt was not successfully implemented.
According to IMF conditions, the circular debt was supposed to be controlled at 2,310 billion rupees for the current fiscal year. If this condition is not met, it could lead to a violation of the loan agreement.
Moreover, the IMF has released its executive board meeting schedule through September 18, 2024, and Pakistan, which direly needs external funding to bail out its economy, is not included on the agenda.
Separately, Finance Minister Muhammad Aurangzeb on Monday stressed the importance of restoring public trust in the government’s economic policies, saying that the private sector must take the lead in driving the country forward.
His remarks came during the Senate session where he addressed economic challenges.
“We cannot move forward until public confidence is restored. The private sector must step up and lead the country,” Aurangzeb stated, adding that currency stability and single-digit inflation have been achieved in the current fiscal year, with improved exports in July and August.
Responding to a question from Senator Shibli Faraz regarding a shortfall in tax collection, the finance minister explained, “We are Rs98 billion behind in tax collection. However, private sector credit has risen by half a trillion. The government needs to maintain fiscal discipline. As the prime minister has said, the government’s job is not to run businesses but to empower the private sector.”
