Privatization of Two RLNG-based Power Plants Hits a Snag Due to Circular Debt

In pursuit of meeting IMF’s requirement, the government is struggling to privatize two RLNG-based power plants due to pandemic and accumulation of circular debt of Rs. 145 billion.

The Cabinet Committee on Privatization cleared two re-gasified liquefied natural gas-based power plants for a 100 percent sell-off in the coming two years. These are 1,233 megawatts Balloki power plant and 1,230 megawatts Haveli Bahadur Shah power plant. However, the privatization process lost its steam due to the pandemic. In the meantime, both power plants started accumulating circular debt, rising to Rs. 145 billion. The power plants had a circular debt of only Rs. 10 billion before March 2020.

“Now the government wants re-financing of debt of two RLNG plants but the commercial banks are reluctant to refinance the debt mainly because of accumulation of circular debt rising to Rs145 billion,” said representatives of banking sectors to a local news outlet.

In the last review with IMF, Pakistan has explained to the international money lender that economic uncertainty and the pandemic slowed down the country’s privatization drive. The government now aims to privatize the two power plants by the end of February in the current financial year. The government also informed IMF about initiating the privatization process of Pakistan Steel Mill (PSM) and Heavy Electrical Complex (HEC) as well.

To facilitate the sell-offs of these State-owned Enterprises (SOEs), the country is improving the transparency of the enterprises through special audits and publishing audit reports.

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