The federal government has signed a financing agreement of 1.225 Billion of rupees with a consortium of 18 banks to approach the circular debt of the country sector, a Minister of Finance of Muhammad Aurangzeb transactions described as the largest restructuring agreement in Pakistan.
The Minister of Finance Facilitated The Loan Agreements With Habib Bank, Meezan Bank, National Bank of Pakistan, Allied Bank Ltd, United Bank Ltd, Faysal Bank Ltd, Bank Al Habib Ltd, McB Bank Ltd, Bank Alfalah, Dubai Islamic Bank, Bank of Punjab, Pakistan, Askari Bank Ltd, Habib Metropolitan Bank, Al Baraka Bank Ltd, Bank of Khyber, MCB Islamic Bank and Soneri Bank.
The signature ceremony took place in Islamabad and witness practically Prime Minister Shehbaz Sharif from New York. The Prime Minister described the agreement as “significant milestone” in efforts to limit assembly debt, crediting the working group to “fulfill its responsibilities in an excellent way”.
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Shehbaz added that during a recent meeting, the director general of the IMF welcomed the government’s reform agenda. He stressed that the next step would be the privatization of electricity distribution companies (Disco) and take up the challenge of line losses, urging those responsible to move forward with “the confidence and resolution of the company”.
Aurangzeb said that the financing installation is a “win-win situation for all” and directly support efforts to resolve the circular debt crisis. He stressed that the advantages of structural reforms in the power sector will finally reach consumers.
Federal Minister of Energy Sardar Awais Ahmad Leghari praised the circular debt financing center as a historic initiative “to restore the financial health of the electricity sector. He noted that the measure is not isolated, but was part of a wider reform program aimed at ensuring stability and relieving consumers.
According to an official press release, the Signature Ceremony of the Prime Minister’s house was praised as a breakthrough in the fight against the crisis of the circular debt, which has set out the energy supply chain, shook the confidence of investors and inflated to almost 2.4 rumors of rupees – 2.1% of GDP.
The main banks participated in the agreement. Pakistan Banks’ Association (PBA) has worked closely with the Ministry of Finance, the Ministry of Energy, the State Bank of Pakistan (SBP) and the Central Power Achat Agency (CPPA) to establish a consensus on regulatory and financial obstacles. Restructuring is described as one of the most important financial transactions in the history of Pakistan.
Find out more: Banks RS1.2 Billion of circular debts
The arrangement includes 659.6 billion rupes for restructuring existing loans on banks’ books and 565.4 billion fresh financing rupees to erase government payments late for power producers. The release of sovereign guarantees of a value of 660 billion rupees will unlock liquidity, allowing banks to inject funding in agriculture, SMEs, housing, education and health care.
The structure supported by cash flows does not add a new burden for the government or consumers. Instead, the service overload of the RS3.23 debt existing per unit will be redirected to reimbursement. The loans will be at the price of Kibor minus 90 base points – around 150 points of base lower than the current rate. This concession reflects the will of the banks to absorb reduced income to make the transaction viable.
The president of the PBA, Zafar Masud, said that the agreement had reaffirmed the role of the sector as a partner in national development. “This transaction does not only concern figures; It is a question of reaffirming the role of the banking industry as an equal partner in the economic development of Pakistan. The resolution of the stock of circular debts reflects the commitment of the PBA to the construction of the nation and shows what can be achieved when the public and private sectors work with a shared vision, “he said.
Officials noted that the agreement provides a model to resolve structural challenges through innovation and collaboration. By joining the government, the banking sector has positioned itself as a trusted partner to provide sustainable solutions and establish new standards for prudent tax management and public-private cooperation.
