Adeel Hassan 
A significant fiscal move by Pakistan to calm its ailing energy infrastructure, the approval of a $713 million grant aims to stabilize Pakistan power sector cash flow and alleviate liquidity strains..The move comes when the cash flow of the power sector of the country is in trouble due to the growing circular debt, and the inefficiency in the distribution companies is putting a financial burden on the national economy. The move is approved by Economic Coordination Committee (ECC) headed by Finance Minister Muhammad Aurangzeb and is part of the larger reform commitments in the program of the International Monetary Fund (IMF) in Pakistan. It is hoped that the funding will be able to maintain operational stability, rebuild investor confidence and maintain smooth operation of electricity supply chains.
ECC Approves Major Grant for Power Sector Stability
The Economic Coordination Committee, which is the highest economic body in Pakistan has passed a Technical Supplementary Grant of 200 billion Pakistani rupees (about 713 million dollars) to support the Pakistan power sector cash flow issue. The Finance Division established that the money will be injected as government investment in the Distribution Companies (DISCOs) equity.
This ruling indicates that the government has accepted the liquidity deficits that remain to plague the electricity production, transmission and distribution in the nation. The government will position DISCOs in a better financial position to minimize operational disruptions associated with late payments and unpaid subsidies.
DISCOs and the Ongoing Circular Debt Challenge
DISCOs are important in billing, revenue collection and grid maintenance. Nevertheless, years of political manipulations, poor governance, and inefficiencies have deteriorated the Pakistan power sector cash flow crisis. These shortcomings have made circular debt of their own unpaid bills which spread throughout the energy supply chain.
The vicious debt trap has suppressed the quantity of electricity, discouraged individual investment, and created more burden on the state. The cash flow problem of the Pakistan power sector has thus become one of the priorities of the economic reforms agenda.
Privatization Plans Under IMF Reform Agenda
To develop the long-term solutions, Pakistan is going to privatize three major DISCOs namely Islamabad Electric Supply Company (IESCO), Faisalabad Electric supply Company (FESCO), and Gujranwala Electric Power Company (GEPCO). These are reforms that have been undertaken on commitments of an IMF program to the tune of $7 billion.
Privatization is likely to enhance efficiency, minimize losses, and avoid any repeat of the cash flow situation experienced in the Pakistan power sector because of the influx of capital and new management practices by the private sector.
Additional Approvals and Economic Review
In the energy sector, the ECC also passed a solution to pay 945 families of missing persons a total of 4.775 billion, which would be done through the Commission of Inquiry on Enforced Disappearances.
Conferring to the larger economic variables, the committee reported that there has been a remarkable falling of the inflation level with an average of 5 percent in the period between July and November, which was 7.9 percent as compared to the same period last year. This betterment was attributed by officials to fiscal discipline and sound market control. Catch Pakistan’s hottest news and facts!
