Despite Imran Khan's promise to reduce circular debt to zero, Pakistan adds Rs 498 billion in FY21

The continuous increase in the flow of the circular debt during the third year of Imran Khan's Tehreek-e-Insaf (PTI) government is against the promises that the ruling party had made to bring the circular debt to zero by December 2020.

The government added Rs 498 billion to the flow of circular debt in the last fiscal year (FY21) due to less provision of subsidies against commitments and increased cost of inefficiencies, showed documents of the Energy Ministry, reported The Express Tribune.

Circular debt is a public debt that is a cascade of unpaid government subsidies, which results in the accumulation of debt on distribution companies.

However, the government claimed to add a net Rs 177 billion in the circular debt in the fiscal year 2020-21 that ended on Wednesday on the back of the increase in electricity prices and reduction in the stock of the debt, according to a summary that the Energy Ministry submitted before the Cabinet Committee on Energy.

Meanwhile, the government has now made another plan to reduce the debt, mainly by increasing electricity tariffs and also by addressing inefficiencies, reported The Express Tribune.

Energy Minister Hammad Azhar did not respond to the questions regarding why the government could not address power sector inefficiencies even in the third year and was it justified to take credit for the slow increase in debt that was because of increasing electricity prices instead of improving efficiency.

The government has been making efforts to improve efficiency but the power sector situation remains grim despite putting an additional burden of Rs 156 billion on consumers in the past year by increasing electricity prices, showed the summary.

The circular debt in June 2018 was Rs 1.148 trillion that has jumped to Rs 2.327 trillion by June 2021 - an increase of 102 per cent or Rs 1.179 trillion in three years of the PTI rule, according to the Energy Ministry. The ministry has added June circular debt figures on a projected basis, reported The Express Tribune.

In its first year, the PTI added Rs 464 billion in the circular debt and in the second year another Rs 538 billion were added. The energy ministry has claimed that the projected increase in the circular debt was Rs 177 billion in the third year.

(ANI)

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