Latest news with #Rs1.275trn
Business Recorder
4 days ago
- Business
- Business Recorder
Power sector debt: Govt secures historic Rs1.275trn loan deal from banks
ISLAMABAD: After months of negotiations on term sheets and legal formalities, the government has finalized agreements for a historic loan package of Rs 1.275 trillion with approximately 18 commercial banks to address the growing circular debt in the power sector. According to sources, the draft agreements are now ready for final approval by the Federal Cabinet. The loan aims to offset a portion of the circular debt, which currently stands at approximately Rs 2.3 trillion. The government has already secured the International Monetary Fund's (IMF) endorsement for its circular debt reduction plan, which includes borrowing from commercial banks. Of the total debt, around Rs 700 billion is currently held on the books of the Power Holding Company Limited (PHL) on behalf of the power distribution companies (Discos). Rs1.275trn loan to tackle circular debt: CPPA-G likely to sign term sheets with 18 banks During ongoing discussions with the IMF Review Mission, both the Finance Division and the Power Division briefed the mission on the status of negotiations with commercial banks and the terms outlined in the draft agreements. Under the deal, commercial banks will extend fresh loans amounting to Rs 617 billion at an interest rate of 10.50–11 percent, pegged to the Karachi Interbank Offered Rate (KIBOR) minus 0.2 percent. Repayments will be made over six years through the Debt Service Surcharge (DSS), which is currently charged to consumers at Rs 3.23 per unit in electricity bills. To meet IMF structural benchmarks, the government also plans to uncap the DSS, which currently represents 10 percent of the total revenue of power companies. This will be done through a legislative amendment, enabling the payment of interest and partial repayments of loans raised by PHL that appear on Discos' balance sheets. 'We have finalized all necessary documentation and term sheets with the banks, and these are expected to be approved before Eid (this week),' a source confirmed. Earlier reports suggested that commercial banks had requested guarantees from the State Bank of Pakistan in case of government default. However, sources indicated that government negotiators emphasized the systemic risk to banks' investments if the power sector were to collapse—an implied warning rather than a direct threat. A government official denied any coercion, stating that banks were merely urged to recognize the severity of the situation. 'This is a massive, unprecedented transaction in Pakistan, so naturally, many aspects needed to be carefully finalized,' the official said. Another senior official involved in the initiative confirmed that all outstanding matters with the banks have been resolved. 'The indicative term sheet was signed by all banks last week. It now awaits approvals from the federal cabinet and the CPPA-G Board. A summary will be submitted to the cabinet next week, after which the loan documentation will be completed within three to four weeks,' he explained. Loan disbursements are expected before the end of the current month so that reduced figures of circular debts are shown in the budget documents. According to official documents, the government has committed to borrowing Rs 1.252 trillion from commercial banks to repay all outstanding PHL loans (Rs 683 billion) and settle the remaining interest-bearing arrears owed to power producers (Rs 569 billion). The loan is expected to be secured at more favourable terms than those currently applied to the existing circular debt—one of the primary factors contributing to its accumulation. Repayments will be made over six years through DSS collections. Copyright Business Recorder, 2025
Business Recorder
15-05-2025
- Business
- Business Recorder
ECNEC approves 9 uplift projects worth Rs355.736bn
ISLAMABAD: Executive Committee of the National Economic Council (ECNEC) Wednesday approved 9 development projects worth Rs. 355.736 billion in key sectors including transport, energy, education, water resources, trade facilitation, tourism, and post-disaster recovery. Deputy Prime Minister / Foreign Minister Senator Mohammad Ishaq Dar chaired the Executive Committee of the National Economic Council (ECNEC) meeting Wednesday. Ecnec approves 13 key projects worth Rs1.275trn The approved projects for Khyber Pakhtunkhwa include rural accessibility upgrades, and the Integrated Tourism Development Project (KITE). Other key approvals covered flood rehabilitation initiatives to restore critical infrastructure in Sindh, early learning classroom transformation in Sindh, and the construction of Mangi Dam with a water conveyance system in Quetta. Copyright Business Recorder, 2025
Business Recorder
23-04-2025
- Business
- Business Recorder
Circular debt: Govt in talks with banks to raise Rs1.275trn
ISLAMABAD: Dr Inayat Hussain Deputy Governor of the State Bank of Pakistan (SBP) said Wednesday that the government is currently negotiating terms and conditions with banks to raise around Rs. 1.275 trillion in financing for tackling the issue of circular debt. While briefing the Senate Standing Committee on Finance and Revenue on Circular Debt Restructuring on Wednesday, Deputy Governor SBP said that the SBP's negotiations with the banks have entered into the final stage. 'The expected deal is at advance stage', he added. Out of this amount of around Rs. 1.275 trillion, the government will use Rs 658 billion for payment of debt within the power sector. Break-up revealed that an amount of Rs 400 billion would be used for Sukkuk bonds and remaining amount would be used for payment of debt. An additional amount of nearly Rs 670 billion would be raised for meeting other requirements of the government. In this regard, the assets are being identified in order to secure loans from Islamic banks. Rs1.275trn loan to tackle circular debt: CPPA-G likely to sign term sheets with 18 banks Moreover, the Committee was briefed by the Deputy Governor of the State Bank of Pakistan on the government's efforts to restructure circular debt within the power sector. Senator Shibli Faraz expressed concern over the strategy, stating that securing new loans to service old ones merely shifts the burden onto the public. He noted that while the government previously paid the mark-up, this responsibility will now fall on the people. He remarked that this is not a sustainable solution, as the root causes remain unresolved, and the circular debt problem will persist unless fundamental reforms are implemented. The Senate Standing Committee on Finance and Revenue, presided over by Senator Saleem Mandviwalla, convened Wednesday at the Parliament House to deliberate on key policy, legislative, and regulatory matters. The Committee adopted the report of the Sub-Committee on 'Resolving the Issues Related to Solar Panels' and recommended that one month be given to the State Bank of Pakistan and the FBR to finalise the report for future course of action to minimize the issue of over-invoicing and under-invoicing. The committee members while discussing the Private Member's Bill titled 'The Income Tax (Amendment), 2025,' introduced by Senator Zeeshan Khanzada, unanimously decided to report to the House that the matter may be referred to the Speaker of the National Assembly to ascertain the status of the said bill as a Money Bill or otherwise. The Committee further deliberated on the federal government's rightsizing policy, with Committee members voicing concerns over its clarity and implementation. While the goal of reducing government bloat was acknowledged, questions were raised regarding the impact on existing employees. Senator Sherry Rehman emphasised the need for transparency, asking whether the abolishment of posts targets only vacant positions or also affects current staff, particularly long-serving contract employees. She further stressed the importance of a macro-level overview of the financial and human resource implications by early June. The Chairman of the Committee reiterated that both departmental mergers and affected employees must be clearly identified to present a comprehensive picture of the policy's impact. Officials confirmed to the Committee members that the data is still being compiled, with a deadline of 30 June for finalization. The meeting was attended by Senators Sherry Rehman, Shibli Faraz, Faisal Vawda, Manzoor Ahmed, the Special Secretary and Additional Secretary of the ministry of Finance and Revenue, the Additional Secretary of the Cabinet Division, Chairman FBR, Deputy Governor of the State Bank of Pakistan, and other officials from the relevant departments. Copyright Business Recorder, 2025
