Circular debt surges to Rs2.31 trillion

Islamabad: The longstanding problem of circular debt in Pakistan's energy sector has taken a worrying turn; according to the most recent data, as of June 2023, it has risen to an astounding Rs2.31 trillion.

According to the Ministry of Energy's most current circular debt report, this represents a worrying 2.5% year-over-year increase, or an extra Rs57 billion, compared to the same period in 2022.

When compared month to month, the circular debt appears to be declining, with a fall of Rs336 billion from May 2023's Rs2.65 trillion, but experts warn that the long-term issue still poses a severe threat.

The Federal Board of Revenue (FBR)'s withdrawal of Rs 5 billion in April 2023 is mostly to blame for this decline. In addition, Rs 21 billion has been released in relation to unpaid claims from the previous year.

The ongoing subsidy dispute between the government and K-Electric (KE) is one of the numerous factors fueling this rising debt.

A substantial Rs346 billion from KE was yet unpaid as of June 2023, which made the revolving debt situation much worse. To stabilize the financial stability of the energy sector, this conflict must be resolved.

Moreover, the government has not been inactive, even though the circular debt problem is still significant. In order to address the issue, they have invested Rs 162 billion through fiscal measures in the energy industry. But it is clear that more extensive measures are required to address this ongoing problem given the Rs57 billion in circular debt that still needs to be paid.

The circular debt issue has plagued Pakistan's energy sector for a long time, and despite some short-term relief, the most recent data emphasize the need for a sustainable and long-lasting solution to guarantee the stability of the country's power supply and the financial health of its energy producers.