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Govt Seeks Rs1.25 Trillion Loan to Tackle Energy Sector Debt
Pakistan is negotiating a Rs1.25 trillion loan to reduce its mounting energy sector debt! Will this move ease the crisis or add to financial burdens?
ND
by News Desk
2025-03-08
Govt Seeks Rs1.25 Trillion Loan to Tackle Energy Sector Debt

The government of Pakistan is in negotiations with commercial banks for a Rs1.25 trillion ($4.47 billion) loan to tackle the country’s growing energy sector debt, according to Power Minister Awais Leghari and the Pakistan Banks Association (PBA).

Resolving this debt is a key priority under Pakistan’s ongoing $7 billion IMF bailout program, which aims to stabilize the economy and prevent further financial strain.

Loan Repayment Plan

Power Minister Awais Leghari confirmed that the loan would be repaid over a 5 to 7-year period, though the final termsheets are yet to be signed.

The government, which owns or holds a major stake in most power companies, is struggling to settle energy debts due to fiscal constraints. Despite raising electricity prices as per IMF directives, Pakistan still faces a massive backlog of unpaid energy sector liabilities.

How Will the Loan Help?

The Rs1.25 trillion loan is part of a broader government strategy to reduce circular debt—a recurring financial issue caused by unpaid subsidies and power bills. By eliminating government-guaranteed debt and shifting towards a revenue-based system, authorities aim to lower borrowing costs and improve debt servicing efficiency.

“This approach will help us reduce financing costs and enable the government to pay off interest and other debt obligations,” said Ammar Habib Khan, an advisor to the power minister.

Bank Participation & Interest Rates

The government has approached multiple banks for participation. While the decision remains voluntary, Leghari is optimistic that banks have the liquidity and interest to fund the plan.

Pakistan Banks Association Chairman Zafar Masud stated that the loan’s interest rate would be floating, with major banks expected to take part.

“This will help clear up all outstanding debt in the next 4 to 6 years that has been sitting on banks’ balance sheets,” Masud said, adding that over half of the Rs1.25 trillion debt is already with banks and is currently undergoing restructuring.

By restructuring through self-liquidating facilities—which currently lack steady cash flows—the government hopes to introduce a more sustainable financial model for the power sector.

The Road Ahead

As the government works to finalize loan terms, stakeholders will be watching closely to see if this move reduces consumer costs and improves financial stability in Pakistan’s power sector.
Tagged:

PakistanEconomy

IMFBailout

EnergyCrisis

CircularDebt
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