ISLAMABAD: Pakistan’s power minister announced on Wednesday the government has settled Rs 659.6 billion ($2.37 billion) in energy sector debt, calling it the largest-ever debt market transaction carried out in the country as Islamabad pushes ahead with reforms to curb mounting liabilities in its troubled power sector.
Circular debt, the chronic build-up of unpaid bills across the electricity supply chain, has for more than a decade crippled Pakistan’s power system, driven by poor bill recovery, high line losses, tariff shortfalls and expensive financing costs.
Successive governments have struggled to contain the debt pile, which has strained public finances and remained a key point of friction in bailout talks with the International Monetary Fund.
“Delighted to announce the successful completion of PKR 659.6 billion PHL settlements ... through capital markets which is Pakistan’s largest-ever debt market transaction,” Power Minister Awais Leghari said on X, referring to the settlement of Power Holding Limited liabilities.
PHL is a government-owned entity that borrowed heavily over the years to finance the power sector.
The minister said part of the settlement involved redeeming Pakistan Energy Sukuk I and II, Islamic bonds raised earlier to plug power sector financing gaps, through an off-market National Debt Market (NDM) transaction.
Leghari said the redemption included Rs 399.6 billion ($1.44 billion) in sukuk-related obligations and Rs 259.7 billion ($935 million) in syndicated bank loans.
“This landmark transaction is a core component of the PKR 1,225 billion [$4.41 billion] Circular Debt Reduction Plan, reflecting strong institutional confidence in Pakistan’s economic reforms,” he said, adding the move demonstrated the capacity of Pakistan’s capital and Islamic finance markets to manage large-scale restructuring operations.
The minister said the government remained committed to long-term structural energy reforms, fiscal stabilization and continued engagement with stakeholders to accelerate “reform-driven growth.”
