The deal with 18 commercial banks that will see Rs1.25 trillion go into settling the soaring circular debt has come as an out-of-the-box remedy. Circular debt has been an enigma for the economy as it constitutes 4% of GDP, stagnating growth and creating external balance problems. The energy sector, owing to this mounting debt, has become dysfunctional and one with dire repercussions on public finances and social developmental programmes.

Under the arrangement, Rs659 billion would be used for loans payable by Power Holding Ltd (PHL), and the remaining Rs556 billion would be used to pay dues to IPPs and petroleum sector entities, and make subsidy adjustments, including through book adjustments and cash settlements. The complex restructuring is a step in urgency to overcome repayment issues,

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