Islamabad May 20 2024: According to the latest data released by the Ministry of Power, Pakistan’s power sector circular debt increased by PKR 325 billion in the first seven months of the fiscal year 2024, reaching PKR 2,635 billion despite a payment of PKR 137 billion from fiscal reserves.
“The circular debt (CD) stock stabilized in late 2023 and early 2024, secured by continued efforts to bring energy tariffs in line with costs and, in the power sector, continued anti-theft measures. Power CD, at PKR 2.6 trillion (2.5 percent of GDP), has remained broadly flat since October 2023 after some slippage earlier in the fiscal year due largely to lower-than expected recoveries following the large annual tariff rebasing in July 2023” writes IMF in its Second and Final Review Under the Stand-by Arrangement.
“In the gas sector, the authorities implemented another significant (24 percent on average) gas tariff increase on February 15. The change maintained a progressive rate structure to protect vulnerable residential consumers; significantly increased and equalized prices for fertilizer companies in the system; and modestly increased prices for captive power and some industrial users” IMF states.
Of this PKR 2,635 billion, PKR 1,760 billion is payable to power producers, PKR 111 billion is owed by GENCOs to fuel suppliers, and PKR 765 billion is parked in PHL.
The majority of the debt increase is due to a PKR 214 billion rise in pending generation costs, including quarterly and fuel cost adjustments, and a PKR 198 billion shortfall due to under-recoveries from DISCOs.
Interest charges on PHL contributed an additional PKR 72 billion to the circular debt from July to January 2024.
The government has paid PKR 137 billion from fiscal reserves to reduce stock payments.
