Circular debt

Published January 31, 2019

WITH the approval of a plan to float Rs200bn worth of Sukuk bonds to partially settle some claims of the circular debt, the government has chosen to walk down an oft-tried road. Since the first floatation of Term Finance Certificates in 2009 for the same purpose, this will be the fourth major retirement of the outstanding amounts in the power sector in a decade. Along the way, there have been other such retirement exercises or liquidity injections, but none have succeeded in dealing with the problem in a sustainable manner. The largest such exercise was undertaken in 2013, when the PML-N government was sworn in, while making promises that the circular debt would not be allowed to return. Yet today, it is higher than it ever was, standing Rs1.4tr, and threatening to choke the power sector all over again.

Retiring at least a portion of these outstanding amounts from government funds is probably the only option available today, as it was in the years past. But simply retiring the amount without bringing about any deep-rooted changes in the billing and recovery systems of the power sector, as well as reforming the pricing and governance regime will be a fruitless exercise. That is how we have run this circle for decades. Sadly, accompanying the announcement of the plan for Sukuk bonds, there was also the announcement that the power division had backed away from its commitments to bring about improvements in system efficiency. As of now, more than six months into its term, the government has advanced no vision and no big ideas about how it intends to reform the power sector to improve its liquidity position and streamline its governance. So the Sukuk bond looks like nothing but a temporary measure at the moment. The amount is not large enough to make a meaningful dent in the problem, yet is big enough to impact public indebtedness. The time to bring forward a vision for reform of the power sector has long arrived.

Published in Dawn, January 31st, 2019

Opinion

Editorial

Judiciary’s SOS
Updated 28 Mar, 2024

Judiciary’s SOS

The ball is now in CJP Isa’s court, and he will feel pressure to take action.
Data protection
28 Mar, 2024

Data protection

WHAT do we want? Data protection laws. When do we want them? Immediately. Without delay, if we are to prevent ...
Selling humans
28 Mar, 2024

Selling humans

HUMAN traders feed off economic distress; they peddle promises of a better life to the impoverished who, mired in...
New terror wave
Updated 27 Mar, 2024

New terror wave

The time has come for decisive government action against militancy.
Development costs
27 Mar, 2024

Development costs

A HEFTY escalation of 30pc in the cost of ongoing federal development schemes is one of the many decisions where the...
Aitchison controversy
Updated 27 Mar, 2024

Aitchison controversy

It is hoped that higher authorities realise that politics and nepotism have no place in schools.