The International Monetary Fund (IMF) has pressed Pakistan to take swift action to address its growing circular debt. During ongoing negotiations, a special session was held to discuss Pakistan’s Circular Debt Management Plan. Sources revealed that Pakistan has informed the IMF delegation about its intention to reduce circular debt by Rs. 1,250 billion, with Rs. 300 billion of this potentially being settled.
Pakistan’s proposed strategy involves borrowing Rs. 1,250 billion from banks to alleviate the debt, alongside waiving late payment surcharges of up to Rs. 600 billion. To fund this effort, the government may introduce a surcharge of Rs. 2.8 per unit on consumers.
A comprehensive plan to manage circular debt is under development, with the final details set to be discussed in upcoming policy talks. While there has been a reduction of Rs. 10 billion in debt over the past six months, rising electricity demand in the next six months may result in an increase in circular debt.
In related developments, the government has abandoned its earlier plans to introduce a mini-budget for the fiscal year 2024-25. Instead, an alternative strategy is being pursued to address a Rs. 605 billion shortfall. A significant part of this plan focuses on resolving pending tax-related cases in various courts. Prime Minister Shehbaz Sharif has expressed full support for the initiative, and the Chief Justice of Pakistan, Yahya Afridi, has approved the fast-tracking of these cases. A critical hearing on the matter is scheduled for March 10 in the Supreme Court.
