Banks agree to provide loans to government on easy terms to pay off circular debt, report

Islamabad (INP) A consortium of 15 banks has expressed its willingness to provide a loan of Rs 1272 billion to the government to get rid of the circular debt of the power sector.

According to a media report, a consortium of 15 banks has agreed to provide a loan of Rs 1272 billion to the government to get rid of the circular debt of the power sector. According to sources, the banks will provide this loan at an interest rate of 9.09 percent below the market rate. The agreement is expected to be signed in the next one or two days. According to sources, the banks have accepted the government’s proposal to provide loans on easy terms. This loan will be given to the Power Holding Company for 5 years, with the possibility of extension.

According to sources, the government wants to prevent the stock of circular debt from increasing further with this loan. At present, out of the Rs 2,531 billion circular debt, Rs 683 billion is only in interest. According to sources, the cost of this interest to the public is Rs 3.23 per unit. Under the proposed scheme, payments to banks will be made from this surcharge, which will be reduced to zero in the future.

The government will pay Rs 111 billion to the Power Holding Company from its financial space. In addition, Rs 190 billion will be saved due to reduction in losses of discos and line losses. After the provision of loans from banks, the stock of circular debt will remain at only Rs 300 billion.