In what is being described as the largest restructuring deal, Pakistan has signed a finance deal worth ₹1.2 trillion with a consortium of 18 banks to ease of some of its burgeoning power sector debt.
The signing ceremony with the consortium, comprising Pakistani and foreign banks, was held in Islamabad and witnessed virtually by the country’s Prime Minister, Shehbaz Sharif, from New York, where he is attending the 80th session of the UN General Assembly.
In his remarks on the occasion, Sharif termed the agreement a “significant milestone” in efforts to curb the mounting circular debt crisis, and credited a task force that had been created for the purpose for “fulfilling its responsibilities in an excellent manner.”
The circular debt is described as that owed by the government to the independent power producer (IPPs), which produce electricity and sell it to the government for onward transmission to the public and industry.
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According to an official statement, the signing ceremony at the prime minister’s house was hailed as a breakthrough in tackling the circular debt crisis, which has strained the energy supply chain, shaken investor confidence and swelled to nearly ₹2.4 trillion – 2.1 per cent of the GDP.
The next step, said Sharif, would be the privatisation of power distribution companies (DISCOs) and tackling the challenge of line losses. He also claimed the International Monetary Fund’s (IMF) managing director had recently praised the Pakistan government’s reform agenda.
Urging officials to move forward with “confidence and firm resolve,” Sharif stressed on the deal’s importance in easing his country’s mounting debt.
Meanwhile, Pakistan’s Finance Minister, Muhammad Aurangzeb, described the agreement as the “largest restructuring deal in Pakistan’s history” and a “win-win situation for all”.
Aurangzeb said it will directly support the government’s efforts to resolve the circular debt crisis and emphasised that the benefits of structural reforms in the power sector will ultimately reach consumers.
Despite massive increase in the power tariff, debts have continued to accumulate over the years due to power losses, theft, corruption and lopsided deals with the IPPs, which have made billions of rupees while the masses were crushed under heavy electricity bills.
While the government promises that the deal would help tackle the circular debt on a permanent basis, many feel skeptical about the claim.
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