The circular debt of Pakistan

The loan program of IMF suspended in January has not been functioning again as Pakistan public debt surpassed 87% of the GDP toward the end of 2019-20 that was previously 72% of the GDP back in 2017-18.

Pakistan is in dire need of IMF support to maintain bilateral relations with other countries and make that happen, they need to have $78 billion allotted as foreign public debt.

While the circular debt is growing as a key challenge to the country’s financial situation, The road map for its resolution and through governance has become a critical issue in the way of $6 billion IMF support stalled since February.

The government is in dire need of installing a tracker outside the country secretariat that can keep an automatic track of the growing debt 24/7. The circular debt is growing at an average of 1.5 billion PKR per day.

In July and august of the present year the increment recorded was 87 billion PKR. It would be safe estimate the power sector payable at around 2.28 trillion at the end of the 1st quarter of the present pascal year.

The government has been taking initiative to bridge the financial gaps in power and gas sectors in the past few weeks. The ECC of the cabinet took decision for the expected revenue generation of 180 billion PKR but was not implemented by the federal cabinet.

The power sector’s required payments also reached 1.44 trillion PKR by the end of august. Luckily the biggest portion of 690 billion PKR is recoverable from private consumer. It is even more alarming that the power supply of small consumer will be disconnected in case bill not paid. Around 180 billion PKR is outstanding against K-Electric while the rest is payable in public sectors.

ECC approved the increment in the tariff of electricity and gas by 17% and 14% respectively on September 30 to generate a revenue of about 180 billion PKR. This will result an increment in 130 billion revenues from power companies and 22 billion from gas companies.

The cabinet deferred the implementation od the new rates on October 6. On the other hand IMF is trying hard to make Pakistan implement the ECC decision on price to take a start. Keeping the subsidy element aside the increase in terrif on user using 200 units will 32 paisa per unit.

Other consumer will not feel even a pinch of these new rates because the decision reversal and new charging schedule to be announced on the 1st day of October.

The regular build od political activities by different parties against the rising rates, bad economy and biased accountability is a clear barrier in way of the government to take a decision. The government is already under pressure because of some decisions and promises the made in the past. The policies and reforms they are making are mainly based on long term have not been proven fruitful yet. That’s why the pressure seem increasing on the government.

IMF clearly linked the persistent of the program based on taxation reforms and price adjustment mechanisms on gas power sectors.

The loan program of IMF suspended in January has not been functioning again as Pakistan public debt surpassed 87% of the GDP toward the end of 2019-20 that was previously 72% of the GDP back in 2017-18.

Pakistan is in dire need of IMF support to maintain bilateral relations with other countries and make that happen, they need to have $78 billion allotted as foreign public debt.

While the circular debt is growing as a key challenge to the country’s financial situation, The road map for its resolution and through governance has become a critical issue in the way of $6 billion IMF support stalled since February.

The government is in dire need of installing a tracker outside the country secretariat that can keep an automatic track of the growing debt 24/7. The circular debt is growing at an average of 1.5 billion PKR per day.

In July and august of the present year the increment recorded was 87 billion PKR. It would be safe estimate the power sector payable at around 2.28 trillion at the end of the 1st quarter of the present pascal year.

The government has been taking initiative to bridge the financial gaps in power and gas sectors in the past few weeks. The ECC of the cabinet took decision for the expected revenue generation of 180 billion PKR but was not implemented by the federal cabinet.

The power sector’s required payments also reached 1.44 trillion PKR by the end of august. Luckily the biggest portion of 690 billion PKR is recoverable from private consumer. It is even more alarming that the power supply of small consumer will be disconnected in case bill not paid. Around 180 billion PKR is outstanding against K-Electric while the rest is payable in public sectors.

ECC approved the increment in the tariff of electricity and gas by 17% and 14% respectively on September 30 to generate a revenue of about 180 billion PKR. This will result an increment in 130 billion revenues from power companies and 22 billion from gas companies.

The cabinet deferred the implementation od the new rates on October 6. On the other hand IMF is trying hard to make Pakistan implement the ECC decision on price to take a start. Keeping the subsidy element aside the increase in terrif on user using 200 units will 32 paisa per unit.

Other consumer will not feel even a pinch of these new rates because the decision reversal and new charging schedule to be announced on the 1st day of October.

The regular build od political activities by different parties against the rising rates, bad economy and biased accountability is a clear barrier in way of the government to take a decision. The government is already under pressure because of some decisions and promises the made in the past. The policies and reforms they are making are mainly based on long term have not been proven fruitful yet. That’s why the pressure seem increasing on the government.

IMF clearly linked the persistent of the program based on taxation reforms and price adjustment mechanisms on gas power sectors.

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