The government has received approval from the International Monetary Fund (IMF) to borrow PKR 1.25 trillion (USD 4.5 billion) from domestic banks to address the country’s mounting circular debt without impacting its public debt figures, The News reported.
This approval follows recent discussions between Pakistani authorities and IMF officials, during which the government presented a six-year strategy to tackle the PKR 2.4 trillion debt burden in the power sector.
The IMF’s nod provides crucial fiscal space by keeping the new borrowing off public books, offering relief amid Pakistan’s economic challenges. To repay the loans, the government will impose a Rs3 per kilowatt-hour debt servicing surcharge (DSS) on electricity bills, which is expected to generate over PKR 300 billion annually.
The plan involves using bank loans and surcharge proceeds to retire PKR 1.5 trillion in debt while also saving PKR 463 billion through renegotiated agreements with Independent Power Producers (IPPs). Officials have assured the IMF that improved collection practices and operational efficiency will prevent further debt accumulation.
Minister for Power Awais Ahmed Khan Leghari welcomed the approval, stating that the borrowing would not affect Pakistan’s debt-to-GDP ratio and confirming that no policy violations had occurred.
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