Pakistan’s federal government has taken a major stride to resolve long-standing issues in its energy sector. On September 25, 2025, it finalized a Rs1.225 trillion financing agreement with a consortium of 18 commercial banks. This pact targets the persistent circular debt plaguing the power industry, which has hampered reliable electricity supply and added to fiscal pressures.
The deal, announced through official channels, marks a collaborative effort between the government and the banking sector to inject fresh liquidity into the system. It comes at a critical time as the country grapples with rising energy demands and economic recovery challenges.
Also Read: Pakistan Targets $1 Trillion Economy by 2035
Details of the Financing Agreement
The agreement provides Rs1.225 trillion in funding to settle outstanding dues within the power sector. Circular debt, a buildup of unpaid bills between power producers, distributors, and the government, has exceeded Rs2.5 trillion in recent years, leading to frequent outages and investor hesitancy.
Also Read: Islamic Mutual Funds in Pakistan Surge to 42.8% Market Share Amid Steady Growth
Key elements include:
- Consortium Role: The 18 banks, including major players like Habib Bank and National Bank of Pakistan, will disburse funds over a structured timeline to ensure steady cash flow.
- Repayment Terms: Linked to government revenues and tariff adjustments, with safeguards to prevent debt recurrence through reforms in billing and collection.
- Immediate Impact: Initial tranches will clear payments to independent power producers (IPPs), potentially averting load-shedding during peak winter months.
This initiative builds on prior efforts, such as the 2023 IMF-backed plan, but scales up financing to match current debt levels.
Government Officials’ Statements
Prime Minister Shehbaz Sharif hailed the pact as a “turning point” for sustainable energy. In a statement from the PM Office (@PakPMO), he emphasized that resolving circular debt would unlock investments and lower electricity costs for consumers.
Finance Minister Muhammad Aurangzeb (@Financegovpk) added that the deal reflects strong confidence from the banking sector in Pakistan’s reform agenda. “This financing not only addresses immediate liabilities but paves the way for a self-sustaining power market,” he noted.
The agreement aligns with the government’s broader fiscal strategy, including subsidy rationalization and renewable energy pushes.
Also Read: PSX Edges Higher on September 24 as KSE-100 Gains 0.18%
Implications for Pakistan’s Energy and Economy
Clearing circular debt could reduce transmission losses and encourage private sector entry into renewables. Analysts expect it to ease pressure on the budget, freeing up funds for development projects.
However, success hinges on implementing complementary reforms, like smart metering and anti-theft measures, to curb future buildup. The energy ministry projects a 10-15% drop in average tariffs over the next year if targets are met.
Also Read: Khyber Pakhtunkhwa Launches Interest-Free Loan Scheme
This move also signals progress in Pakistan’s engagements with international lenders, potentially smoothing paths for further aid.
Moving Forward
With the ink dry on this landmark deal, attention shifts to execution. The government plans quarterly reviews with stakeholders to track progress and adjust as needed.
This financing could prove instrumental in stabilizing Pakistan’s power grid, benefiting households and industries alike. Stay tuned to nawatimes.com for updates on economic reforms and energy news.
Also Read: Shariah-Compliant Stocks Dominate PSX Trading on September 24
