In a major step toward resolving the persistent circular debt in Pakistan’s power sector, the federal government on Thursday signed a Rs1.275 trillion financing agreement with a consortium of 18 commercial banks at reduced interest rates.
The signing ceremony took place at the Prime Minister’s Office (PMO) in Islamabad, while Prime Minister Shehbaz Sharif virtually attended the event from New York, where he is participating in the United Nations General Assembly session.
The financing arrangement secures Rs1.275 trillion from commercial banks at an interest rate of 3-month KIBOR (the benchmark rate banks use to price loans) minus 0.9%.
Repayments will be made through the existing surcharge of Rs3.23 per unit already included in electricity bills.
This initiative represents a strategic shift from previous policies of maintaining a fixed circular debt level. Instead, the focus is now on gradually reducing the debt burden through structured bank financing.
According to the press release issued by the Finance Ministry, this joint effort was led by the Prime Minister’s Task Force on Power in coordination with the Ministry of Energy, the State Bank of Pakistan, the Pakistan Banks Association, and 18 partner banks.
