ISLAMABAD: The International Monetary Fund (IMF) has raised alarms regarding the escalating circular debt in Pakistan's power sector, as reported by a private news channel citing well-informed sources.

During recent virtual discussions, Pakistani authorities disclosed their plan to increase the circular debt by an additional 100 billion rupees within the current fiscal year. This projected rise is expected to push the total debt in the power sector beyond 2,550 billion rupees by June 2025. Currently, the circular debt stands at over 2,400 billion rupees, prompting heightened scrutiny from the IMF. The global lender has expressed serious concerns over Pakistan's persistent difficulties in managing and controlling this growing debt. The IMF's apprehension underscores the critical nature of addressing the issue to avoid further economic strain.In response to the IMF's concerns, Pakistan has assured the global lender that it will implement timely adjustments to tariffs to mitigate the impact of the circular debt. This commitment aims to stabilize the sector and prevent the debt from escalating further. The IMF has set a clear mandate that the circular debt should not surpass 2,500 billion rupees.

However, reports indicate that Pakistan struggled to adhere to previous agreements. Last fiscal year's plan to control the debt was not effectively executed, leading to a continuation of the problem. Under IMF conditions, the circular debt was supposed to be capped at 2,310 billion rupees for the current fiscal year. The failure to meet this target could result in a violation of the loan agreement, potentially jeopardizing future financial support from the IMF.As the situation develops, the IMF's ongoing scrutiny and Pakistan's efforts to manage its debt will be crucial in determining the sector's financial stability and the country's adherence to international financial agreements.