Circular debt surpasses Rs1,000 billion


ISLAMABAD: The Pakistan Economy Watch (PEW) on Sunday said that despite low oil prices, the circular debt has crossed the mark of Rs1,000 billion emerging as a grave threat to the economy.

LNG and many other power projects have failed to deliver raising concerns about investments to the tune of billions of dollars, it said.

Political interference, mismanagement, and secrecy have damaged the power sector resulting in circular debt which is draining the resources, said PEW President Murtaza Mughal.

The unaddressed circular debt is to compromise growth and hitting masses with power outages in the summer which is contrary to the claims of production of electricity to the tune of 25,000 MW, more than the national demand.

Dr Mughal said that the debt has become a big threat to the image, credit rating and economic survival of the country. It is hitting industrial expansion, investment in Thar coal and other energy projects and pushing away investors while it is leaving IPPs unable to buy fuel or repay bank loans.

The chronic circular debt hits ability of the government institutions to buy fuel resulting in problems including loss of around Rs400 billion to the industrial sector, increase the cost of production, reduce exports and tax collection and fan restlessness.

Things are seriously wrong deep inside the energy sector and the way it is managed by the government. Various measures the present government has taken have failed to deliver.