Federal cabinet’s approval of largest financial restructuring scheme marks a critical and ambitious move toward resolving one of the most pressing issues in the country—the ballooning circular debt in power sector.
Chaired by Prime Minister Shehbaz Sharif, the cabinet’s decision represents a comprehensive, long-overdue initiative to restructure and streamline the finances of the energy sector without further burdening the already stretched national budget.
The plan is both bold and forward-looking. It aims to eliminate Rs1,275 billion in circular debt over the next six years—a figure that reflects the alarming scale of the problem. At the heart of the strategy is the refinancing of Rs683 billion currently owed by the Power Holding Company, alongside the settlement of longstanding dues owed to Independent Power Producers (IPPs). These measures are designed not just to plug financial leaks but encourage long-term sustainability within the power sector. This is not the first time that efforts have been made to address the issue. In the past also plans were unveiled with high hopes, only to see the circular debt continue its relentless climb. Mismanagement, policy inconsistencies and lack of political will rendered many past initiatives ineffective. As a result, the circular debt became not only a financial liability but a structural impediment to the entire energy supply chain. However, the current plan, under the leadership of Prime Minister Shehbaz Sharif, is different in both its scope and its execution strategy. It is built on a realistic foundation of financial reform, institutional sustainability and policy continuity. The fact that this plan has been devised without imposing additional pressure on the national budget is particularly significant. It shows a matured fiscal approach, where structural issues are addressed through long-term planning rather than short-term patchwork solutions. The commitment of the present government to comprehensive economic reform is already beginning to yield results, with signs of improving macroeconomic stability and enhanced investor sentiment. The Prime Minister rightly described this step as “historic”—not just for its potential financial impact, but for what it signals: a government serious about solving deep-rooted problems through durable solutions. We believe the successful implementation of this restructuring scheme would be a turning point for energy sector. The challenge lies in execution, transparency and consistent follow-through. If done rightly, this could be a legacy-defining achievement for the government and a transformative milestone for energy future.
