Some things never change - Sunday holidays, Monday blues and circular debt amongst others. Yes, it is unfortunate that the inter-corporate circular debt has become somewhat of a constant factor in Pakistani economy. And that certainly is not a good sign. What is a good sign, though, is that the circular debt is soon to be resolved - as early as within six to nine months. At least Hina Rabbani Khar, the Minister of State for Finance and Revenue, thinks so. And since she is no Raja Pervez Ashraf, her words might just be believed - the only difference is that she has not promised the exact deadline of eradicating the circular debt.
Thankfully, nobody in the National Assembly asked how she is going to do it, as it would certainly have left her speechless.
Recent media reports suggest the circular debt to have touched a whopping Rs500 billion mark - that is a lot, even by Pakistani standards. No way can the government wipe this off any time soon, given the fiscal constraints it faces - especially in the post-flood environment.
TFCs used to be the saviour when the circular debt was in infancy, but that too was just to provide a buffer that lasted no more than a month. But, in the current scheme of things, TFCs are nowhere in the reckoning as financial institutions are seemingly reluctant to enter the mess, of which there are no signs of being cleared.
So what should the government do now? They will probably keep injecting the life saving dossiers whenever the situation reaches the boiling point. This, unfortunately, is not the right answer to deal with the devil.
The fact is that as long as the government keeps saying that they are going to eradicate circular debt, it will remain there - because speech is no replacement for action. It is essentially the root cause that the government needs to address. Chopping the rotten bush is not the perfect idea when you ignore the root that keeps giving birth to it, day in and day out.
And the root cause is the ailing power sector that needs to be reformed. And reforms won come with the help of ADB or the World Bank alone, it will need a strong political will, in the absence of which, the exercise will be futile as it has been seen in the past. If circular debt has to be taken care of, then the loopholes in the power sector must be dealt with.
No more can the power sector woes be resolved in the name of tariff rationalisation, which, in simpler words, means higher tariff resulting from the power sectors inefficiency. Unless the power companies are forced to improve their billing collection and significantly lower the T&D losses, circular debt is here to stay. The power sector has been living on the knives for far too long; it is time to make amends, soon.
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