Pakistan plans to borrow another $1.44 billion for power sector

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Pakistan plans to borrow another $1.44 billion for power sector

ISLAMABAD: Pakistan plans to borrow another 200 billion rupees ($1.44 billion) to help clear power sector debt destabilizing the finances of the government and private power producers, a senior official tasked with energy reforms said.

Pakistan’s economy and society have been racked by a decade of chronic electricity shortages which have crippled its manufacturing industries and stoked voter anger in the South Asian nation of 208 million people.

Electricity shortages have eased in the last 12 months but years of mismanagement and funding shortfalls for subsidies have led to accumulated power sector payment arrears, or “circular debt”, soaring to 1.4 trillion rupees ($10.1 billion).

Independent power producers (IPPs) angry with late government payments have warned they face a financial crisis, while economists fear rising circular debt will further widen Pakistan’s yawning fiscal deficit, a key part of ongoing bailout talks with the International Monetary Fund.

Pakistan earlier this month raised 200 billion rupees through an Islamic bond to ease a financial crunch in its power sector, but critics say much more needs to be done.