ISLAMABAD – Federal Power Division Minister Awais Leghari on Friday announced that Pakistan’s power sector circular debt will be cut to Rs389 billion after securing a Rs1.225 trillion financing agreement with 18 commercial banks. He claimed the debt would be fully eliminated within the next six years.
The minister said the government had already reduced circular debt by Rs780 billion in one year. It fell from nearly Rs2.4 trillion to Rs1.614 trillion through savings and reforms. With the fresh loan facility, he added, the debt would decline further to Rs389 billion.
Leghari explained that the financing deal would be repaid within five to six years. The Rs3.23 per unit surcharge currently collected from consumers to retire circular debt will also end during this period.
He said the problem had grown into a major economic burden, rising from Rs1.1 trillion in 2018 to Rs2.25 trillion by 2022. When the present coalition government took office, it stood at Rs2.4 trillion. “Through tough reforms, we have reduced it to Rs1.64 trillion by June,” he said.
The minister highlighted savings of Rs363 billion from talks with independent power producers (IPPs), Rs242 billion from curbing system losses, and Rs175 billion from reduced interest rates after economic stabilisation. The financing agreement with banks also secured interest savings of 3.5 to 5.5 percent, further easing the burden.
Leghari described the development as a “historic step” and said the plan had been discussed with the IMF and included in programme targets. He stressed that reducing circular debt would not only stabilise the energy sector but also create fiscal space for health, education, housing, and agriculture.
He noted that power distribution companies were improving performance, while industries were getting electricity at 38 percent lower rates. Nearly 18 million domestic consumers were also benefiting from reduced tariffs.
The minister warned that solar net-metering tariffs had created imbalances and needed review to protect fairness across consumer groups. He said circular debt would be eliminated permanently through sustained reforms. “Pakistan’s economy depends on its energy sector. By resolving circular debt, we are ensuring long-term growth and stability,” he added.
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