Pakistan’s federal cabinet has approved a 1.275 trillion Pakistani rupees (approximately $4.6 billion) plan to tackle circular debt in the power sector and aims to restore financial stability and investor confidence.

The prime minister’s office announced this on Thursday.

Describing it as a “historic step”, Prime Minister Shehbaz Sharif said the plan would bring sustainable reforms, reduce fiscal burden, and strengthen the country’s energy infrastructure without adding pressure on the national budget.

The six-year plan will be financed through domestic commercial banks at an interest rate 0.9 per cent below the three-month Karachi Interbank Offered Rate, with repayment spread over 24 quarterly instalments, the Ministry of Energy said in a separate statement.

Around 683 billion rupees ($2.47 billion) will be used to refinance the Power Holding Company’s liabilities, while the remainder will clear long-standing dues of Independent Power Producers.

The ministry added that annual repayments are capped at 323 billion rupees ($1.17 billion), with a ceiling of 1.938 trillion rupees ($7 billion) in case of interest rate fluctuations. 

(Xinhua/NAN)