Govt Proposes Rs4 Trillion Payment to IPPs to Address Circular Debt Crisis

The ministries of finance and energy presented a significant recommendation to tackle the mounting circular debt crisis impacting Pakistan’s power sector. The proposal involves making a one-time payment of Rs4 trillion to Independent Power Producers (IPPs) as a strategy to relieve the financial strain caused by the circular debt.

Sources revealed that this collective payment to the IPPs is aimed at alleviating the pressure on circular debt and could potentially lead to a reduction in electricity prices by Rs5 per unit. The proposed payment plan is designed to be executed over a period of three to five years, providing much-needed relief to consumers facing high electricity costs.

The Finance Ministry has been tasked with arranging the necessary financing for this substantial payment. However, the final decision on implementing this recommendation will be made following consultations with the International Monetary Fund (IMF).

This proposed measure underscores the government’s effort to address the persistent issue of circular debt, which has long plagued the power sector and affected electricity pricing in the country. The outcome of the discussions with the IMF will be pivotal in determining the feasibility and timeline of this financial intervention.