Circular Debt becomes challenge for Govt in talks with IMF: Sources

ISLAMABAD: The staggering electricity’s Circular Debt has become a major challenge for the government during talks with the International Monetary Fund (IMF) to secure the next loan installment, ARY News reported.

Review talks with the global lender are scheduled to be held in Pakistan next month.

Sources state that the circular debt is 130% larger than the limit set by the IMF, which had originally targeted keeping the debt at Rs 1,600 billion.

The US-Iran conflict led to an increase in global energy prices, which in turn caused the circular debt to surge, according to sources.

In this context, Prime Minister Shehbaz Sharif has instructed his economic team to devise an alternative plan instead of hiking electricity prices.

During the negotiations, Pakistan will brief the IMF on targets achieved under structural benchmarks, and both sides will exchange views regarding circular debt targets in the electricity and gas sectors. The talks will also cover broader structural reforms in the energy industry.

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Additionally, Pakistan will hold discussions with the IMF on economic reform targets. Upon the successful completion of these talks, Pakistan will receive the fifth installment of its existing loan program.

Sources indicate that Pakistan is likely to receive $1 billion under this fifth installment, alongside an additional $200 million to help build resilience against climate change hazards.