United Business Group’s central leader and former Senior Vice President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Syed Mazhar Ali Nasir, has stated that circular debt, which has become a persistent and growing challenge for Pakistan’s economy, has reached alarming levels over the past decade. Mazhar Ali Nasir mentioned that this self-sustaining debt trap has far-reaching consequences, hindering economic growth and undermining the country’s financial stability.

He pointed out that circular debt has surged from approximately PKR 400 billion in 2012 to a staggering PKR 2.5 trillion in 2024, indicating a six-fold increase. The massive rise in circular debt has primarily been due to the hefty payments made to Independent Power Producers (IPPs) under capacity charges. Mazhar Ali Nasir highlighted that the severe consequences of this include a cash flow crisis in the power sector, lack of investment in production and transmission infrastructure, increased burden on consumers in the form of higher tariffs, heavy strain on the national treasury, negative impacts on the country’s credit rating, and a decline in investor confidence.

Mazhar Ali Nasir further elaborated that the primary cause of circular debt was paying IPPs for capacity charges, which exceeded PKR 1.3 trillion. These payments became an unbearable financial burden on the power sector, irrespective of electricity production. He urged the government to implement structural reforms in the power sector, renegotiate IPP contracts to reduce capacity charges, improve the efficiency of electricity production, and rationalize consumer tariffs.

Mazhar Ali Nasir emphasized that circular debt has become a significant obstacle to Pakistan’s economic growth. He stressed the government’s need to take immediate and decisive action to address this issue, ensuring a sustainable and prosperous future for the nation and protecting the people from this injustice.