Circular debt repaid

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Pakistan cleared up the circular debt of the power sector, with a payment of Rs158 billion on Monday. In 47 days the debt federal Finance Minister Ishaq Dar had committed to clearing in 60 days, was dispatched.

The government in its seriousness to tackle the loadshedding problem, is involved in not only formulating new policy, but also paying the price for the bad decisions of the past i.e., raising circular debt in an effort to temporarily cover up system of inefficiency which is part of the real problem. The government has not only confidence, but also high expectations on its side, as shown in a survey that reveals that 59 percent of respondents believed that the government would end load-shedding in three years.

Senator Dar disclosed this while talking to a Malaysian delegation on Monday. He told the delegation that not only would the government encourage investment in the power sector, but it would also work for the short to medium term addition of 1700 MW to the system. Resultantly, there will hopefully be a visible reduction in loadshedding.

The payment of the circular debt will only benefit the economy if there is foreign investment attracted because a serious intent to ensure a power policy is implemented is seen.

Tariffs too must come down, on this the consumer is insistent. That should prevent the government from increasing the already too-high tariff, but news reports indicate that it has decided to carry out back-breaking increases in October, with the domestic tariff going up to about Rs 14 per unit and the commercial tariff to about Rs 19. This might be necessary to obtain the IMF loan, about which Senator Dar boasted to the delegation, but it does not seem consistent with the aim of any government which, as the present one had been, had campaigned on a promise of an ‘economic explosion’.

Meanwhile Punjab Chief Minister Mian Shahbaz Sharif continues to give assurance to the Chinese Ambassador, who called on him in Lahore on Monday, that power sector projects will be completed on time. Chinese firms are mostly putting up alternative energy projects, including hydel projects, and thus contributing not just to ending the energy shortage, but also to doing so affordably.

The government may take credit for the paying off of the circular debt, but unless there is a marked reduction in loadshedding, it will seem nothing but a step to please the IMF. As it is, the tariff hike is meant to meet another IMF condition, that the power subsidy be eliminated.

Courtesy:  Nation

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