The Economy of Pakistan
Circular Debt and the Energy Sector
Unpaid bills between power companies, distributors and the government create a chain of debt that drains public finances.
Electricity is costly and troubled.
What it is
Distribution companies do not collect enough revenue, so they cannot pay generators and fuel suppliers, who in turn are unpaid.
Causes
Theft, losses, subsidised tariffs and capacity payments to power plants.
Cost
The government injects billions to keep the system running.
Reforms
Raising prices, cutting losses and shifting to cheaper sources are difficult but necessary.
A blackout
Load-shedding cuts power for hours in summer when demand peaks.
Assuming cheap power is always a benefit
Someone must pay eventually.
Key takeaways
- Circular debt is a chain of unpaid bills.
- Theft and losses contribute.
- The state bears the cost.
- Reform is difficult.
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