Pakistan prepares an exhaustive strategy to fight the circular debt

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IMF plans usually come with the condition to erase the subsidies that the government offers to the masses. Removing the subsidy saves the public sector entity from furthering the loss it makes.

Circular_debt_Pakistan_IMF
Photo credit AFP

 

Circular debt hitting a thousand billion mark paints a gloomy picture of persistent and longstanding energy crises in Pakistan. This kind of debt, in general, arises out of power theft, inefficiencies in the distribution lines, and the government’s inability to recover the total amounts billed to consumers by power companies. The debt haunts both the energy as well as the financial sector.

The government is said to have prepared a comprehensive circular debt reduction plan with quarterly targets for losses, collection, and accumulation of arrears by Discos, a report from the News International read.

Monitoring and incentive framework for strengthening the sector’s performance, improving distribution companies governance’, reducing the implicit government subsidies to particular economic sectors are some of the elements of the plan to reduce the circular debt crisis.

IMF plans usually come with the condition to erase the subsidies that the government offers to the masses. Removing the subsidy saves the public sector entity from furthering the loss that the entity has to cope with in terms of the debt crisis.

The assessment of investment needs in the power sector and designation of an investment plan apart from addressing the stock of circular debt to service the interest on accumulated power sector debt is also on the cards to reduce the circular debt.

The government has committed with the IMF that it implemented the quarterly adjustment of the power tariff and will also notify the FY2020 electricity tariff schedule as determined by the regulator at the end of September this year under the structural benchmark, the report added.


Also See: Despite Economic Overhaul, FDI In Pakistan Continues To Fall

The country, however, is said to have submitted its envisioned plan to erase the circular debt within the envisaged deadline before IMF under the structural benchmark.

The government missed out the deadline for issuing a license for track and trace system for cigarettes in order to reduce tax avoidance, told Omar Hamid Khan of the Finance Ministry to The News, adding that that the government has achieved its target related to Benazir Income Support Programme (BISP) for end September 2019.

Do you think that Pakistan would be able to show full-scale compliance with the terms and conditions of IMF loan? Share your views in the comment section below

  • Yes, Until they control the leaks within system which still exist. No regrets to say that, selected team is compromised too.

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