Pakistan’s government is negotiating a $4.47 billion loan with commercial banks to tackle its mounting energy sector debt.
Government’s Plan to Tackle Circular Debt
The loan, amounting to 1.25 trillion Pakistani rupees, will be repaid over five to seven years, according to Power Minister Awais Leghari. The government, which owns or holds significant stakes in most power companies, faces severe fiscal constraints in resolving the sector’s debt.
The government’s strategy includes eliminating government-guaranteed debt and shifting to a revenue-based system. This approach aims to reduce financing costs, making it easier for the government to pay interest and service existing debt.Banks Show Interest in Participation
The government has approached multiple banks to secure the loan, and Power Minister Leghari remains optimistic about their participation. He believes there is enough liquidity in the system to support the transaction.
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Impact on Consumers and Economy
According to Ammar Habib Khan, an advisor to the power ministry, restructuring these debts will enhance efficiency and lower costs for consumers.
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