Power sector circular debt plan okayed by Cabinet

ISLAMABAD: The federal cabinet on Wednesday approved the country’s largest-ever financial restructuring plan aimed at addressing the long-standing issue of circular debt in the power sector, targeting the elimination of Rs1.275 trillion in circular debt over the next six years.

A statement issued by the Prime Minister’s Office after the cabinet meeting, chaired by Prime Minister Shehbaz Sharif, said the plan aims to eliminate Rs1.275 trillion in circular debt over six years without adding pressure to the national budget. The cabinet described this as a major milestone towards energy sector reform.

The statement said that under the scheme, Rs683 billion in debt held by the Power Holding Company will be refinanced, while overdue payments to independent power producers (IPPs) will be cleared.

Power sector debt: Govt secures historic Rs1.275trn loan deal from banks

The cabinet described the move as a historic step towards restoring financial stability in the power sector and a key measure to boost investor confidence.

It praised the finance minister and the broader economic team for presenting a public-friendly budget for the upcoming fiscal year.

During the cabinet meeting, the prime minister expressed deep concern over the escalating armed conflict between Iran and Israel, warning that the situation posed a serious threat to both regional and global peace.

While chairing the federal cabinet meeting, Sharif reiterated Pakistan’s complete solidarity with Iran and its people against Israeli aggression.

He said Pakistan strongly condemned the attacks, which had resulted in the deaths of hundreds of Iranian civilians and injuries to many others.

PM Sharif called on the international community to intervene and press for an immediate ceasefire. “The global powers should ensure a ceasefire,” he said, expressing hope for lasting peace in the region.

The prime minister informed the cabinet that he had spoken to Iranian President Masoud Pezeshkian during the crisis to convey Pakistan’s solidarity and to condemn the Israeli attacks. He also held discussions with Turkish President Recep Tayyip Erdogan on the evolving situation. Turning to the situation in Gaza, PM Sharif said the suffering there was heart-wrenching and noted that more than 50,000 Palestinians had been killed. “Brutality is being unleashed. When will the world’s conscience wake up,” he asked.

Sharif announced that Deputy Prime Minister and Foreign Minister Ishaq Dar would represent Pakistan at the Organisation of Islamic Cooperation (OIC) foreign ministers’ meeting in Türkiye on June 21-22.

Discussing the recently unveiled federal budget for 2025-26, the prime minister showered praise on Finance Minister Muhammad Aurangzeb, the finance team, and the chairman of the Federal Board of Revenue (FBR) Rashid Mehmood Langrial for consulting allied parties and stakeholders in budget preparations.

He said Pakistan had persuaded the International Monetary Fund (IMF) not to impose taxes on the agriculture sector, including levies on fertilisers and pesticides, arguing that the sector was already under pressure. The IMF agreed to the request, he added.

PM Sharif noted that individuals earning between Rs600,000 and Rs1,200,000 annually would now pay only 1% in income tax, compared with 5% last year.

In a veiled criticism of the previous Pakistan Tehreek-e-Insaf (PTI) government, he said his administration had avoided the policy missteps that had pushed the country to the brink of default. “We have pulled back the country from a financial fiasco, and now it is moving forward,” he added.

He also highlighted the government’s increased allocation for the Public Sector Development Programme (PSDP), which had been raised to Rs1,000 billion in the current fiscal year. He said the government had expanded fiscal space to meet the armed forces’ equipment needs as part of its ongoing fight against terrorism.

He credited the recent great victory in a conflict with India to the professionalism of the armed forces and the support of 240 million Pakistanis. The cabinet approved the appointment of Kamaluddin Tipu as chairperson of the Commission for the Protection of Journalists and Media Professionals, following a recommendation by the Ministry of Human Rights.

It also approved an exemption under Section 21 of the Public Procurement Regulatory Authority Ordinance 2002, allowing the National Power Parks Management Company Limited to procure services for the acquisition of the Rousch Power Plant. Additionally, the cabinet ratified decisions taken by the Cabinet Committee on Legislative Cases in a meeting held on 21 May 2025.

He commanded Bilawal Bhutto Zardari and his delegation for effectively presenting Pakistan’s case against Indian unilateral and illegal aggression during visits to the United States and Europe. Sharif also lauded Chief of Army Staff Field Marshal Asim Munir for affirming Pakistan’s resolve to defend its borders and national interests in an address to the Pakistani community in the US.

Copyright Business Recorder, 2025