Govt plans disbursing Rs1,250bn to settle circular debt
Business
Move is subjected to the IMF’s approval
ISLAMABAD (Dunya News/Web Desk) – The caretaker government has decided to release Rs1,250 billion to settle the energy sector circular debt issue, sources says, after Caretaker Prime Minister was briefed on the issue who directed the officials to ensure approval by the International Monetary Fund (IMF) – a prerequisite under the $3bn stand-by arrangement inked last year.
The payment would be made in cash as per the IMF conditions, as the world’s top lender has been pressing Islamabad to address the issue for financial stability of different stakeholders introduce reforms in the energy sector.
According to the sources, Rs1,000bn out of the total funds have been reserved for petroleum and remaining Rs250bn for power sectors.
Major beneficiaries of the move include Oil & Gas Development Company Limited (OGDCL) which will get Rs600, followed by Government Holding Private Limited (GHPL) Rs170bn, Pakistan Petroleum Limited (PPL) Rs150bn and National Power Parks Management Company Limited (NPPMC) Rs100bn.
The sources say the finance minister will release an amount of Rs900bn for the purpose after the IMF’s approval, while the circular debt settlement is going to generate Rs800bn in shape of taxes dividends.
At the same time, the move would widen fiscal deficit as the amount will ultimately return to the national exchequer under different heads.
The move comes after the government earlier shared a a plan with the world’s top lender, which focuses on controlling electricity theft – a major factor contributing to the circular debt and higher tariffs to bridge the losses suffered by the distribution companies (Discos).
Read more: Pakistan assures IMF of checking electricity theft, privatisation of Discos
Earlier, the IMF said the recent increases in electricity and gas tariffs were important to shore up energy sector viability, but stressed the need of broader reforms to tackle the issue structurally.
On the other hand, the government has also informed the IMF that a transaction advisor would be appointed by the end of April to ensure inclusion of private sector and privatisation of discos.
