ISLAMABAD – The International Monetary Fund (IMF) on Friday asked Pakistan to address the issue of circular debt as it is expected to increase further during the ongoing Financial Year 2025-26.
“Pakistan plans to borrow Rs1,250 billion from banks to reduce circular debt. The plan suggests waiving late payment surcharges of up to R600billion,” said the sources close to the development at meeting between Pakistan and International Monetary Fund (IMF).
IMF asked Pakistan to reduce its circular debt.
They said that Pakistan told the IMF that it was working to reduce the circular debt by Rs1250 billion, with Rs300 billion potentially being settled.
“A surcharge of Rs2.8 per unit may be imposed on consumers in a bit to pay off the debt,” said the sources, adding that the government is working on a comprehensive plan to manage the circular debt, which would be finalised in upcoming policy negotiations.
The sources revealed that the previous six months witnessed a reduction of Rs10 billion in stocks while the next six months are expected to see an increase in electricity demand, which may lead to a rise in circular debt.
The government had anticipated an increase of Rs350 billion in circular debt for the current fiscal year.
Earlier on Thursday, the federal government abandoned plans to introduce a mini-budget for FY 2024-25, opting instead for an alternative plan to address the Rs. 605 billion shortfall.
The government was expecting to bring the mini-budget but now it may open another option. The plan would also address the issue of tax-related cases pending in the courts
For this purpose, Prime Minister Shehbaz Sharif assured full cooperation in this regard while Chief Justice of Pakistan Yahya Afridi also approved the request to speed up the hearing of tax-related cases.
The sources said that the IMF was also riefed on the plan. A crucial hearing on the matter is due at the Supreme Court on March 10.
Electricity prices likely to go down across Pakistan including Karachi
