Karachi: The circular debt in Pakistan has surged to a critical level of Rs. 2.5 trillion, posing significant challenges to the nation’s economic stability, revealed Syed Mazhar Ali Nasir, the former Senior Vice President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and a central figure in the United Business Group (UBG). This financial burden has escalated six-fold since 2012, creating severe implications across multiple sectors.

According to Federation of Pakistan Chambers of Commerce and Industry, Mazhar Ali Nasir highlighted the debt’s growth from Rs. 400 billion in 2012 to its current staggering figure. He pinpointed the primary cause as the substantial capacity charge payments to Independent Power Producers (IPPs), which have perpetuated this financial strain. “The exponential growth of circular debt is primarily attributed to massive payments made to Independent Power Producers (IPPs) on account of power captive charges,” Nasir explained, adding that this has led to a liquidity crunch, discouraged investment in infrastructure, heightened consumer tariffs, and placed an enormous strain on the national exchequer.

Moreover, Nasir detailed that over Rs. 1.3 trillion had been paid to IPPs as capacity charges, payments made regardless of the actual power generated, thereby worsening the financial sustainability of the power sector. To combat these challenges, he urged the government to implement structural reforms within the power sector, renegotiate IPP agreements to alleviate capacity charges, boost power generation efficiency, and improve tariff rationalization for consumers.

“The circular debt has become a major obstacle to Pakistan’s economic progress,” Nasir stated, emphasizing the urgent need for decisive government action to address this critical issue and ensure a sustainable and prosperous future for the country.