ISLAMABAD/NEW YORK, Sep 25 (DNA):Prime Minister Muhammad Shehbaz Sharif on Thursday inaugurated Pakistan’s first-ever comprehensive energy circular debt elimination plan, describing it as a “historic breakthrough” that will pave the way for sustainable reforms in the power sector.
Speaking at the signing ceremony, the prime minister lauded the collective efforts of the government, financial institutions, and the task force for successfully negotiating and finalizing the plan.
Prime Minister Shehbaz Sharif joined the ceremony via video link from New York, while ministers, senior officials, regulators, international partners, and CEOs of power sector organizations attended the event at the Prime Minister’s House in Islamabad.
PM Shehbaz Sharif said, “This is the first time in Pakistan’s history that circular debt, which was swallowing our national resources, has been addressed in a structured and effective manner.”
The prime minister highlighted the role of the Power Division, the Petroleum Ministry, and the Task Force in resolving longstanding issues. He paid special tribute to former caretaker energy minister Mohammad Ali, Secretary Power, and Lieutenant General (R) Muhammad Zafar Iqbal for their “tireless negotiations with Independent Power Producers (IPPs).”
Acknowledging the financial sector’s contribution, the prime minister praised Zafar Masood, President of the Bank of Punjab, as well as teams from Meezan Bank, Habib Bank, and other commercial banks for their pivotal support. He also commended the State Bank of Pakistan and the Federal Board of Revenue (FBR) for facilitating the plan’s execution.
The Prime Minister underscored that the initiative enjoyed the “behind-the-scenes support” of Chief of Army Staff Field Marshal Syed Asim Munir, which strengthened the government’s reform drive. “This is Team Pakistan’s success,” he stressed, adding that the International Monetary Fund (IMF) had also acknowledged Pakistan’s reform progress.
“Yesterday, I met the IMF Managing Director, who praised Pakistan’s commitment and speed of implementation. This is unprecedented recognition,” he said.
The Prime Minister urged all stakeholders to continue working with “courage and confidence” to overcome challenges in the energy sector. “Our macroeconomic indicators, business climate, and reforms are receiving international recognition. If we maintain this momentum, Pakistan will surely emerge from its difficulties,” he concluded.
The Federal Ministers for Power, Petroleum, and Advisors on Privatization were also present at the signing ceremony. Representatives of banks from COCPPA, Meezan Bank, and Habib Bank, formally endorsed the agreement on behalf of the financial sector.
Lieutenant General (R) Zafar Iqbal, head of the Task Force, highlighted the difficult but successful negotiations with IPPs, while senior officials of the Power Division and Petroleum Division emphasized the importance of privatization of distribution companies (DISCOs) and reducing line losses in the next phase of reforms.
The Government of Pakistan, in collaboration with a consortium of 18 banks, has finalized a Circular Debt Financing Facility worth Rs. 1.225 trillion to address the energy sector’s circular debt crisis.
Key features of the facility include financing at Karachi Interbank Offered Rate (KIBOR) minus 0.9%, a six-year repayment period, and the use of a Debt Service Surcharge (DSS) as the revenue stream. The plan is expected to retire the debt in less than six years while saving consumers Rs. 350 billion by reducing expensive late payment surcharges.
Of the total package, Rs. 659 billion has been allocated to retire Power Holding Limited (PHL) loans, while the remaining amount will be directed toward payments to Independent Power Producers (IPPs) and Government Power Producers (GPPs) to maximize relief for electricity consumers.
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