PM Shehbaz to Attend Rs 1.225 Trillion Power Sector Loan Deal Signing in Pakistan

PM Shehbaz to Witness Rs 1.225 Trillion Power Sector Loan Deal in Pakistan

Prime Minister Shehbaz Sharif is expected to attend a major signing ceremony for a Rs 1.225 trillion loan deal aimed at tackling Pakistan’s circular debt in the power sector. The agreement will be signed between the government and 18 leading banks.

The Power Division confirmed that all documents, approvals, and guarantees have been completed. The financing package was earlier approved by the federal cabinet and is slightly lower than the initially proposed Rs 1.275 trillion. The adjustment was made to control quarterly payments and avoid an increase in the Debt Servicing Surcharge (DSS) for consumers.

How the Funds Will Be Used

Out of the total financing:

Rs 659 billion will go towards repaying loans of Power Holding Limited (PHL).

The remaining amount will be allocated to power producers, the petroleum sector, and subsidy adjustments. Final decisions will be made under the Prime Minister’s guidance.

The government will have 30 days after signing to request funds from banks, and any withdrawal must be used immediately to avoid penalties.

Banks Involved in the Loan Deal

The agreements involve 18 banks, including:

Meezan Bank, HBL, NBP, Allied Bank, UBL, Faysal Bank, Bank Al Habib, MCB, Bank Alfalah, Dubai Islamic Bank, Bank of Punjab, Bank Islami, Askari Bank, Habib Metropolitan, Al Baraka Bank, Bank of Khyber, MCB Islamic, and Soneri Bank.

These banks will work with the Central Power Purchasing Agency (CPPA-G) on behalf of distribution companies (Discos).

Government Measures

To support the financing deal, the federal cabinet has also:

Approved legal amendments to the Electric Power Act 1997 and the Sales Tax Act 1990.

Released Rs 267 billion for equity investment in Discos and another Rs 393 billion as a technical supplementary grant.

Allowed CPPA-G to use part of the loan to clear Rs 683 billion in PHL debt.

The government is also considering seeking discounts from independent power producers (IPPs), including Chinese companies, on pending dues.

Why It Matters

This financing deal is a key step in reducing Pakistan’s circular debt, which has long been a burden on the energy sector. By restructuring loans and clearing payments, the government hopes to stabilize electricity supply and ease financial pressure.

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