The International Monetary Fund has expressed strong concerns over the uncontrolled growth of circular debt in Pakistan.
The circular debt in the energy sector has surged by a staggering amount of Rs150 billion, raising alarms about its potential impact on the country’s economy.
There are apprehensions that the circular debt could reach a daunting Rs2.5 trillion by the end of the current fiscal year.
The IMF had set a target to control the circular debt at Rs 2.31 trillion for the ongoing fiscal year, urging an increase in tariffs for power and gas.
For the next financial year, the IMF seeks to increase tariffs for power and gas; however, negotiations are ongoing with the IMF mission with the officials of the Ministry of Energy.
The International Monetary Fund has demanded further increase in electricity prices, citing an additional burden of Rs 150 billion on the power sector.
According to sources, the IMF has asked the Ministry of Energy to increase the electricity tariff from Rs5 to Rs7 per unit in July.
The IMF has expressed concern over the failure to achieve the targets, and the power sector’s circular debt is expected to reach Rs 2500 billion by the end of the current financial year.
The Ministry of Energy has been unable to control the circular debt, sources said.
The IMF has also asked the Ministry of Energy to share a plan to increase the power and gas tariffs in the next financial year. The mission is currently in talks with the Ministry of Energy officials to discuss the matter further.
It is worth noting that the power sector’s circular debt was supposed to be controlled at Rs 2310 billion by the end of the current financial year, but it will exceed the target by Rs 150 billion till June.
