ISLAMABAD: The federal government has inked a historic Rs1.225 trillion financing deal with a consortium of 18 banks to tackle the growing circular debt in Pakistan’s power sector. Finance Minister Muhammad Aurangzeb termed it the country’s largest-ever restructuring agreement, aimed at easing financial stress and paving the way for structural reforms.
Prime Minister Shehbaz Sharif, who joined the signing ceremony virtually from New York, hailed the deal as a “milestone” in restoring financial stability. He credited the task force for its performance and stressed that privatisation of power distribution companies (DISCOs) and curbing line losses must follow as the next phase of reforms. He also highlighted recent praise from the IMF managing director for Pakistan’s reform efforts.
The agreement, facilitated by the Ministry of Finance with major banks including HBL, NBP, UBL, Meezan, ABL and others, restructures Rs659.6 billion in existing loans and adds Rs565.4 billion in fresh financing. Sovereign guarantees worth Rs660 billion will be released, creating liquidity for agriculture, SMEs, housing, education, and health sectors. Importantly, the deal introduces a cashflow-backed model, funded through an existing surcharge of Rs3.23 per unit, ensuring no additional burden on consumers or the government.
Federal Energy Minister Sardar Awais Leghari called the Circular Debt Financing Facility a “landmark initiative” and part of a wider agenda to strengthen the energy sector. Pakistan Banks’ Association Chairman Zafar Masud noted the deal showcased how collaboration between government and private banks could deliver sustainable economic solutions. Officials said the arrangement provides a blueprint for tackling future fiscal challenges through innovation and partnership.
