Islamabad : The Islamabad Women's Chamber of Commerce and Industry (IWCCI) on Saturday said the government has successfully reduced circular debt, which is still a great threat to the economy.
The infamous debt has been reduced but not as per the expectations calling for more strict measures, said Farida Rashid, president IWCCI.
Just like the government’s expenses and economic activity, the circular debt starts decreasing whenever Pakistan enters an IMF programme but it reappears whenever Pakistan comes out of the IMF programme.
The debt jumps during elections are the government starts full production of electricity to please voters disregarding other considerations, which is irresponsibility, she added.
Farida Rashid said that the power sector circular debt which was Rs729 billion in June 2017 has now jumped to Rs1.72 billion while the power distribution companies are responsible for nearly 30 percent of the losses.
She informed that the IMF has directed the government to recover the full cost of power production which calls for reforms, improvement in production, transmission and distribution systems, discouraging mismanagement and theft but the authorities have found it convenient to focus on tariff hike only.
The continued hike in power tariff has left masses and production sector reeling as they have braved an additional burden of Rs405 billion but it has not improved the power sector as economic development is impossible unless this debt is reduced to zero.
She noted that the energy prices are rising consistently which are jacking up the cost of doing business which is denting competitiveness of Pakistan.
At the same time the high prices which have made life difficult for the commoners are not enough to slash the growing circular debt in the energy chain.
The government has taken measures to tackle the circular debt by curtailing losses of energy companies and checking power theft along with improved bill recoveries but the debt continues to plague the entire economy and refuses to go away.
She said that the reasons behind circular debt include irrational power agreements, insistence on power production through costly fossil fuel, ignoring hydel and renewable resources to generate electricity and primitive transmission and distribution systems.
IMF wants to reduce circular debt to 50 to 75 billion per month by 2023 and this target cannot be achieved through frequent hike in power tariff, she said.