Islamabad, June 19 (UNI) Pakistan's federal cabinet has approved a 1.275 trillion PKR (approximately USD 4.6 billion) plan to tackle circular debt in the power sector, aiming to restore financial stability and investor confidence, according to the Prime Minister's Office, reports Samaa TV.

Describing it as a "historic step", Prime Minister Shehbaz Sharif said the plan would bring sustainable reforms, reduce fiscal burden, and strengthen the country's energy infrastructure without adding pressure on the national budget.

Under this plan, over PKR 683 billion (USD 2.4 billion) will be refinanced by the Power Holding Company, and outstanding payments to Independent Power Producers (IPPs) will also be settled. The PM termed it a “major milestone for Pakistan’s economy and a crucial step toward a stable future”.

Annual repayments are capped at PKR 323 billion (USD 1.17 billion), with a ceiling of PKR 1.938 trillion rupees (USD 7 billion) in case of interest rate fluctuations, the ministry added.

During the meeting, PM Sharif praised the Finance Ministry's efforts, especially in negotiations with the International Monetary Fund (IMF).

He said that the IMF had accepted Pakistan’s stance on not imposing taxes on agriculture and fertilisers.

“Only 1% tax will be levied on those earning between Rs600,000 and Rs1.2 million annually, down from five percent last year,” he added.

The six-year plan will be financed through domestic commercial banks at an interest rate 0.9% below the three-month Karachi Interbank Offered Rate (KIBOR), with repayment spread over 24 quarterly installments, the Ministry of Energy said in a separate statement.



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