Banks invest to address circular debt, impacting electricity consumers.
Key Takeaways:
i) Eighteen commercial banks in Pakistan are set to inject over Rs 1.25 trillion ($4.6 billion) into the power sector.
ii) This investment aims to address the long-standing issue of circular debt within the sector.
iii) Electricity consumers will face an additional charge of Rs 3.23 per unit to service this debt.
Islamabad, Pakistan – April 17, 2025 – Pakistan’s power sector is poised to receive a substantial financial boost as eighteen commercial banks have signed a term sheet committing over Rs 1.25 trillion (approximately $4.6 billion). This injection of funds is primarily aimed at tackling the chronic issue of circular debt that has plagued the sector for years, impacting the nation’s energy and fiscal stability.
The agreement between the banks involves a combination of rolling over existing liabilities and disbursing fresh loans. This financial restructuring is intended to alleviate the severe cash flow constraints that have hampered the power sector’s efficiency and growth.
As part of the arrangement, an additional charge of Rs 3.23 per unit will be levied on electricity bills. This debt servicing charge is designed to ensure the banks are repaid, but it also means increased expenses for households and businesses across Pakistan.
However, this financial relief will come at a cost to electricity consumers. As part of the arrangement, an additional charge of Rs 3.23 per unit will be levied on electricity bills. This debt servicing charge is designed to ensure the banks are repaid, but it also means increased expenses for households and businesses across Pakistan.
The persistent circular debt in Pakistan’s power sector has been a major concern for both the government and international financial institutions. This injection of funds represents a significant step towards resolving this issue, although the long-term effects on consumers and the overall economy remain to be seen.
