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ISLAMABAD: Federal Minister for Energy. Omar Ayub Khan Monday said that $6.5 billion are being thrown into ‘hellfire’ every year to import energy under the head of guaranteed capacity payments – a major source of accumulation of the circular debt – singed by the previous government.

Speaking in National Assembly during question hour, Omar said that the annual capacity payments to Independent Power Producers (IPPs) would reach Rs1,455 billion in 2023, which he contended was mainly to faulty agreement signed by Pakistan Muslim League-Nawaz (PML-N).

Ayub continued that the annual capacity payments to IPPs were Rs185 billion in 2013, Rs642 in 2019, Rs860 in 2020 and would reach Rs1,455 billion in 2023, adding, “These are hardcore statistics which I’m talking about”.

He said that increase in the prices of electricity was due to badly managed agreements with IPPs comprising wrong fuel mixes, which ultimately forced the country to rely on imported fuels for power generation and face the issue of capacity or compulsory payments.

Ayub blamed PML-N government for rising electricity prices in the country, saying they had no vision due to Pakistan Tehreek-e-Insaf (PTI) government is facing the consequences of their flawed policies.

The House was also informed that Foreign Direct Investment (FDI) declined by 29.9% during July-February (2020-21) and stood at $1300.4 million for the last eight months of the current financial year compared to $ 1854.5 million of the corresponding period July-February (2019-20).

In written reply to a question of Minister In-charge of the Prime Minister’s Office to the National Assembly, various reasons were explained of the decline in investment. According to reply, there is 34.7% increase of FDI outflows amount of $683.6 million as compared to $507.4 million in the same period. Furthermore, overall inflows during the said period also declined from $2361.9 million to $1984.0 million, thus net FDI decreased. It was further explained that Covid-19 had affected the global FDI inflows. During the last year the global FDI shrunk by 42%, which has an effect on all the economies.

It was said in another reply that it is hoped that with the improvement in COVID 19 pandemic, the FDI inflows would also improve substantially, adding the Board of Investment (BOI) has initiated several reforms/initiatives for ease of doing businesses, facilitation of investors, promotion of investment opportunities, regulatory’ reforms, etc.

In a written reply, Minister for Finance and Revenue Hammad Azhar told the House that total public debt increased by Rs12.5 trillion during the 30 months period (Jun. 2018 till Dec. 2020), out of which domestic and external debt contributed Rs7.9 trillion and Rs4.6 trillion respectively.

He said that the present government had to pay Rs6.2 trillion (50% of the increase) as interest on debts borrowed predominantly by the previous governments. He said that Public debt increased by Rs3.0 trillion (24% of the increase) due to currency devaluation. This increase was not due to borrowing but due to revaluation of external debt stock in terms of rupees after currency devaluation, he said.

The minister said that Rs2.4 trillion (19% of the increase) was borrowed for financing of primary deficit; Rs0.6 trillion (5% of the increase) was on account of increased cash balances of the government to meet emergency requirements, this increase in debt was offset by corresponding increase in the Government’s liquid cash balances. He said that Rs0.3 trillion (approx. 2% of the increase) was due to difference between the face value and the realized value of government bonds issued during this period.

In another reply , the minister said hat out of total interest payment of Rs6.2 trillion, amount of approximately Rs1.3 trillion was paid towards new loans obtained (mainly to pay interest on past loans) by the current government.

Copyright Business Recorder, 2021