In a significant step toward addressing the power sector’s mounting circular debt, the federal government on Wednesday signed financing agreements worth Rs 1.275 trillion with commercial banks, reported 24NewsHD TV channel.
The signing ceremony, held at the Prime Minister’s Office, was attended virtually by Prime Minister Shehbaz Sharif, who also delivered a special address. Bank heads, officials from 18 distribution companies (DISCOs), and key stakeholders participated in the event. Representatives of the IMF Mission, World Bank, and Asian Development Bank were also present.
Under the agreement, the government will borrow Rs 1.275 trillion from commercial banks, to be repaid over six years along with interest. The repayment will be financed through a surcharge on electricity consumers, in addition to the existing Rs 3.23 per unit debt servicing surcharge already being charged.
The federal cabinet had earlier approved the plan in June 2025, authorising borrowing at the lowest possible interest rates to gradually eliminate the circular debt stock.
According to official documents, the power sector’s circular debt stood at Rs 1.614 trillion in June 2025, rising further to Rs 1.661 trillion by July 2025.
Speaking at the ceremony, Prime Minister Shehbaz Sharif said the financing arrangement marked “major progress” in reducing the sector’s crippling debt burden, which has long strained the country’s energy and fiscal management.