Immediate Need To Negotiate With IMF After Devastating Floods

According to the reports, the Circular Debt has now accumulated to Rupees 3000 billion, which will continue to increase and it has become alarming in the history of Pakistan. The Circular Debt is severely affecting our GDP and creating power crises as well as serious budgetary constraints. The Economic Coordination Committee (ECC) in its meeting held on 23.9.2021 in Islamabad presided over by federal Finance Minister has released Rupees 131 billion to IPPs.

Although it will surely help the government endeavors to facilitate the IPPs but as usual such steps can never be a permanent solution of this crucial issue, but it can only be used as an immediate tactical tool to gear on power generation produced by the IPPs. We must understand that circular debt is licking our national economy as a perilous termite. It will be fiasco, if it is not controlled immediately or at least substantive measures must be taken right now, failing which it will continue to offset any gain in our GDP in subsequent time periods.

This will continuously result into high cost of production and high cost of production will never allow us to compete for our exports with other countries and the dilemma will be parallel increase in cost push inflation and unemployment. This is the situation of stagflation, which is much unwarranted and must be sidestepped with all-out efforts. Therefore it is the high time, this crucial issue must be resolved or at least determined to be resolved. The government must have to act now, lest we lose all options and fall into the grip of stagflation. Without wasting any further time, the government is proposed to constitute a consortium of all stake holders included with prominent investors from different sectors, renowned technocrats from IPPs, WAPDA, NTDC, Distribution Companies, Ministry of Water & Power and Ministry of Finance with any further constituent as deemed desirable by the government. This consortium is proposed to prepare TOR, which will define the purpose and structure of their meetings and negotiations to combat the outrageous circular debt.

The government will not bail out the crises, but the consortium will initially create a fund for unavoidable payments and necessary adjustments to the IPPs and other distribution channels as deemed desirable. The consortium will chalk out the holistic strategy for single purpose to wipe out the circular debt attributed to the economic and efficient generation and distribution of electricity. The consortium in a sequence of meetings will deliberate the issue at length, prepare proposals to reduce thefts and line losses of all distribution companies, particularly Quetta Electric Supply Company (QUESCO) and Peshawar Electric Supply Company (PESCO) as the inefficiency and incompetence of QUESCO and PESCO are contributing a major share in circular debt and therefore the Consortium will chalk out holistic recommendations for the government to implement in true spirit. The consortium should be conferred with equitable representation from all provinces because distribution companies are owned by the federal government whereas law enforcement is a provincial subject. The objective is to create stakes of the provinces by giving them ownership of distribution companies, and that would in return be responsible for law enforcement as part of the campaign to recover unpaid bills as well as controlling thefts in their respective provinces. At present, there is a gap in coordination as well as law enforcement in and between the federal and provincial governments so far as recovery of unpaid bills and thefts are concerned; because as aforementioned the distribution companies are owned by the federal government while law enforcement is a provincial subject. Recovery of unpaid bills can also be linked with revenue transfers through NFC Award.

Therefore without such substantive measures, the issues of line losses and thefts of distribution companies particularly of QUESCO and PESCO cannot be resolved. The consortium is proposed to constitute a high level Monitoring Committee to monitor the ongoing implementation of recommendations of the Consortium under surveillance of the government. With strong monitoring of the implementation process, as well as by resolve of the government and all stake holders, this circular debt is likely to be gradually reduced and eventually it will be hopefully eradicated. Upon parallel, the NTDC should be awarded with the new projects where necessary to overall upgrade the transmission lines to reduce line losses together with other necessary steps as deemed appropriate should also be taken in tandem. This is how the government is proposed to get rid of this vicious circular debt and then to provide the country with efficient and cost effective electricity, which will boost up our exports and ultimately leading to economic development of the country.

Brief Introduction of Writer
The writer is a member of Pakistan Society of Development Economists (PSDE) PIDE Islamabad, World Economic Association (WEA) Bristol UK, Pakistan Federal Union of Columnists (PFUC), Old Ravian Union G.C. University Lahore and Friends of Economic & Business Reforms (FEBR) Lahore.
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