The government of Pakistan and banks have signed the term sheet worth Rs. 1.27 trillion to end the energy sector circular debt.
Under the agreement, banks will roll over approximately Rs. 658 billion in term finance certificates, while a fresh cash injection of Rs. 617 billion will also be provided.
Sources told ProPakistani that the agreement between banks and the government-run Central Power Agency, which is responsible for purchasing electricity from generation companies, a term sheet has been signed.
As part of the deal, a fresh loan of Rs. 617 billion will be disbursed before May 15 to address the outstanding circular debt.
“The amount to be resolved stands at approximately Rs. 1.25 trillion, with Rs. 658 billion rolled over under the umbrella of Pakistan Holding Company (PHLC), having been previously settled through the issuance of term finance certificates,” sources said.
Additionally, Rs. 617 billion will be disbursed under the agreement, with banks receiving a rate of return between 10.5 percent and 11 percent, based on the Karachi Interbank Offered Rate (KIBOR) plus 0.90 percent.
The loan repayment will span six years, with consumers expected to pay Rs. 3.23 per unit as debt service charges.
Further details indicate that 18 banks will contribute funds in accordance with financial statements from the year 2024.
Out of the total fresh injection of Rs. 617 billion, audited accounts show that approximately Rs. 98 billion will come from the National Bank of Pakistan, about Rs. 81 billion from Habib Bank, nearly Rs. 68 billion from United Bank, and around Rs. 58 billion from MCB Bank. The lowest contribution, Rs. 4.5 billion, is expected from Al-Baraka Bank.
The power sector’s existing circular debt stock stands at Rs. 2.4 trillion (2.1 percent of GDP), with plans to clear it by the end of the current fiscal year.
Under a three-pronged strategy, the government aims to retire Rs. 1.5 trillion through fresh borrowing and existing budgetary support.
An estimated Rs. 463 billion will be deducted from the circular debt following revised energy purchase agreements with independent power producers (IPPs), while Rs. 225 billion will require no further settlement.
Reference Link:- https://propakistani.pk/2025/04/17/govt-banks-agree-rs-1-27-trillion-deal-to-end-circular-debt-in-energy-sector/