World Bank concerned over Pakistan's power sector circular debt

ISLAMABAD: The World Bank (WB) concerned over the rise in Pakistan’s power sector circular debt despite historic hike in electricity tariffs, ARY News reported.

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 has 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.

Earlier, the International Monetary Fund (IMF) also expressed ‘concerns’ over increasing circular debt in Pakistan’s power sector.

The IMF, Pakistan authorities shared the plan of additional 100 billion rupees increase int eh circular debt in the power sector during the current fiscal year.

Sources indicate that by June 2025, the circular debt in the power sector is expected to surpass Rs 2,550 billion.

Meanwhile, Pakistan has assured the IMF of timely tariff adjustments to manage the circular debt.

The IMF has demanded that the circular debt in the power sector should not exceed 2,500 billion rupees. However, sources reveal that even during the last fiscal year, the shared plan with the IMF to control the debt was not successfully implemented.

According to IMF conditions, the circular debt was supposed to be controlled at 2,310 billion rupees for the current fiscal year. If this condition is not met, it could lead to a violation of the loan agreement.