Ninety-four percent of domestic customers will benefit from the budgetary subsidy in 2024, according to a World Bank report, which credits the increase in protected consumers with contributing to the weight of subsidies.
In the current fiscal year, the electricity sector subsidy has increased by an astounding Rs. 954 billion, from Rs. 236 billion in the 2020 fiscal year to Rs. 1190 billion.
Notwithstanding changes, the circular debt has averaged Rs. 400 billion yearly over the last four years due to the incapacity to minimize losses and inadequate recovery of electricity payments.
According to the World Bank, the government must solve the fundamental problems in the power industry in order to lower the burden of subsidies and circular debt, as rising electricity prices and inadequate tax collection will only serve to worsen the circular debt crisis.
The rise in Pakistan’s power sector circular debt has raised worries from the World Bank (WB) despite an unprecedented increase in energy pricing.
Within the last six years, the debt has grown by 1241 billion rupees, according to the World Bank’s study. Between 2019 and 2021, the debt climbed by 1128 billion rupees.
The electricity sector’s circular debt has been increasing at an alarming rate, according to a World Bank analysis. Between 2022 and 2024, there was a substantial increase of 113 billion rupees.
Pakistan’s electricity industry has 2393 billion rupees in total circular debt as of 2024.
Restructuring is required to solve the circular debt issue, according to the World Bank.
