SHAFAQNA PAKISTAN (Shia News Agency)
Circular debt is a constant headache for Pakistan. It is a chronic problem which has no quick fixes. Despite strong austerity measures Government has been once again trapped in this vicious cycle. The government has tripped up on the circular debt. In a written statement in response to a question asked in the National Assembly on Thursday, the water and power minister confirmed that the total amount under circular debt is at Rs258bn as of end February, whereas the receivables of the Discos are Rs552bn. From last year’s spending of Rs340 billion on assorted subsidies, including power and other special relief packages, the government planned a drastic cut down to Rs203 billion but still could not get rid of circular debt. The circular debt accumulates as the government’s subsidy bill balloons. Last year, the government settled a 480 billion-rupee (Dh17.5bn) circular debt after clearing dues to the Independent Power Producers (IPPs) to avoid sovereign default. But now the circular debt has reached a historic high of 580bn rupees, pushing the government back to the situation it was facing a year ago.
In several measures to reduce the circular debt one was the debt recovery surcharge which is just another way of passing the cost of interest on outstanding payables to consumers, except that by calling it a surcharge the approval of the regulator is no longer required. For a lasting fix to the problem of power-sector mismanagement, which is in large measure the cause behind the circular debt, the role of the bureaucracy needs to be reduced dramatically. The circular debt has been a perpetual drain on the country’s fragile economy. It worsens power crises, which have already led to a decline in industrial output, the closure of many industries, unemployment, economic slowdown and an increased fiscal deficit. A liquidity crunch in the energy sector has hit the country’s growth and stalled fresh investment in power generation.
pakistan.shafaqna.com
