Pakistan’s Circular Debt Smashes All Records to Cross Rs. 5.7 Trillion

The power sector circular debt has broken all records to cross Rs. 5.7 trillion as of the end of November 2023. The power sector debt clocked in at Rs. 2.7 trillion during the review month, while the gas sector’s revolving debt spiked by over Rs. 3 trillion, bringing the total debt profile to Rs. 5.73 trillion. The overall energy sector circular debt now stands at 5.4 percent of Pakistan’s GDP, which goes against the International Monetary Fund’s maximum cap of 4 percent of GDP as mentioned in Pakistan’s $3 billion bailout review dated November 15th, 2023. The increase is roughly Rs. 1.5 trillion, or 1.4 percent of GDP, more than the IMF was promised about just two months ago. Further breakdown of the data reveals that out of the Rs. 2.7 trillion reported in November, Pakistan owed more than Rs. 400 billion to Chinese power companies. It bears mentioning that Beijing has tied the release of a $600 million commercial loan to the repayment of the sum. According to a report by the Ministry of Finance, 31 public sector entities lost Rs. 730 billion in 2022. Also, all ten DISCOs operating in Pakistan collectively suffered a loss of Rs. 376 billion during the period, more than half of the overall losses incurred by public sector firms.