Rs142 billion paid to IPPs to lower circular debt as per IMF condition

In order to lower the stock of circular debt, the Central Power Purchasing Authority (CPPA) has given about Rs142 billion to Independent Power Plants (IPPs). On June 27, the balance was paid in full.

According to Rao Aamir Ali of brokerage firm Arif Habib Limited (AHL), in a report on Wednesday, the development is in line with the International Monetary Fund’s (IMF) recommendation of reforms and advancement in the energy sector in a recently signed staff-level agreement for an SBA facility totaling $3 billion.

One of the main objectives of the Washington-based lender has been the control of the spiraling circular debt, particularly in the electricity industry.

“The authorities’ programme also includes ongoing efforts to strengthen the viability of the energy sector (including through a timely FY24 annual rebasing), improving SOE governance, and strengthening the public investment management framework, including for projects needed to build resilience to climate change,” according to the IMF in a press release announcing the staff-level agreement on Friday.

According to the Ministry of Energy’s monthly report, over the first eleven months of FY23, the stock of circular debt rose by Rs394 billion to Rs2,646 billion, or an average of Rs35.8 billion per month, up from a fall of Rs27 billion during the same time in FY22.