The Government will hold a signature ceremony today for a financing installation agreement to reduce circular debt in the electricity sector, according to Prime Minister’s office (PMO).
A letter from the Power Central Power Agency to all banks and entities in the electricity sector invited its executive directors and bosses to attend the event.
He said that the event will take place in the PMO and Prime Minister Shehbaz Sharif will also virtually address the event, since it is currently in New York for the UN General Assembly session.
Pakistan’s debt burden has become the definitive restriction of his fiscal and economic future. According to data published by the State Bank of Pakistan, the total government debt (excluding the International Monetary Fund) increased from RS69 billion in June 2024 to RS78TR in June 2025.
Public debt (including IMF debt) increased to RS80.5TR from RS71.2TR in June 2024. Both numbers underestimate the full level of government indebtedness.
The developments suggest that the government is negotiating with banks to borrow RS1.2TR to resolve the circular debt of the electricity sector.
It was planned to borrow RS1.275TR of the banks, since the government is willing to resolve a part of the circular debt, which has increased to RS2.3tr.
The strange thing is that this loan will be paid for six years through a surcharge of the debt service (DSS) included in the electricity invoices.
Initially, the banks doubted to comply with the government’s request to provide money to a lower rate than the policy rate, but finally, 18 commercial banks agreed to do so. The loan will be paid for a period of six years.
“The government has been borrowing less than the amount of the expiration of treasure invoices during fiscal year 2015, which has substantially increased the outstanding amount. This new loan could address this accumulation,” said a banker.
