ISLAMABAD: The government of Pakistan has decided to release more than 50 billion rupees (Rs) in subsidies for the power sector, ARY News reported.
According to reports, Rs159 billion has already been released to the power sector in the current financial year, but now more than Rs50 billion in subsidies are in the pipeline.
Govt sources say that in the first quarter, Rs128 billion were released for power sector subsidies, and in the second quarter, Rs31 billion have been released so far. After an additional Rs50 billion, the total released subsidy will exceed Rs209 billion.
According to sources, the flow of circular debt is much lower than the target set by the IMF by December. According to the IMF’s target for December 2024, the flow of circular debt in the power sector is to be kept below Rs461 billion, while by December 19, 2024, the target of circular debt has reached only Rs70 billion, which is much lower than the target.
Government sources have expressed hope that as a result of reducing losses and increasing efficiency, the IMF’s target for circular debt in the power sector will be easily achieved.
Read More: Power sector subsidies surge by 400% in five Years: World Bank
Back in October 2024, the World Bank revealed that the power sector subsidies in Pakistan have increased by a staggering 400% in the last five years, putting a major burden on the federal government’s finances.
According to the World Bank report, the growing number of protected consumers had contributed to the surge in subsidy burden, with 94% of domestic consumers benefiting from the budgetary subsidy in 2024.
The power sector subsidy climbed from Rs. 236 billion in the financial year 2020 to Rs. 1190 billion in the current financial year, a staggering increase of Rs. 954 billion.
The inability to reduce losses and poor recovery of electricity bills have contributed to the circular debt, which has averaged Rs. 400 billion annually for the past four years despite reforms.
The World Bank has warned that the increasing electricity tariffs and poor revenue collection will continue to exacerbate the circular debt crisis, making it essential for the government to address the underlying issues in the power sector to reduce the subsidy burden and circular debt.
Earlier, the World Bank (WB) expressed concerns over the rise in Pakistan’s power sector circular debt despite historic hike in electricity tariffs.
The World Bank stated in its report that over the past six years, the debt has increased by 1241 billion rupees, with an increase of 1128 billion rupees between 2019 and 2021.
The World Bank reported that the power sector’s circular debt has been growing at an alarming rate, with a notable increase of 113 billion rupees between 2022 and 2024.
As of 2024, the total volume of circular debt in Pakistan’s power sector has reached 2393 billion rupees.
The World Bank emphasized the need for reforms to address the circular debt problem.
 in subsidies for the power sector.){kind=link}