Pakistan finalizes record Rs 659.6bn power sector debt settlement, says minister

• The Deal promotes cyclical debt cuts as part of the government’s reform plan.
• Analysts say the move boosts energy liquidity and investor confidence.
• The settlement aims to reduce the cyclical debt of the electricity sector.

Islamabad: Pakistan has completed a landmark repayment of Rs 659.6 billion of liabilities of Power Holding Limited (PHL), the largest ever deal in the debt capital markets, Federal Minister for Power Sardar Awais Ahmed Khan Leghari announced on social media. The News reported on Thursday.

The settlement includes Rs 399.6 billion buyback of Pakistan Electric Supply (PES) I & II bonds through the National Depository Mechanism (NDM) through off-market transactions and an additional Rs 259.7 billion cleared in various syndicated financing facilities.

According to the minister, the NDM component of the transaction demonstrates the maturity and strength of Pakistan’s capital market ecosystem and its ability to manage large-scale strategic financial operations.

“This landmark transaction is a key component of the Rs 1,225 billion Circular Debt Reduction Plan,” Leghari said. “It reflects strong institutional confidence in Pakistan’s ongoing economic reforms, government initiatives and the depth of our capital and Islamic finance sectors.”

Experts say the settlement provides a major boost to the energy sector, which has been struggling with high cyclical debt, liquidity constraints and inefficiencies.

By buying out PHL liabilities and restructuring financing obligations, the government aims to strengthen the financial viability of electricity distribution companies, improve investor confidence and pave the way for wider reforms in the energy sector.

The minister emphasized that the government remains committed to structural reforms in the energy sector alongside long-term fiscal stabilization. He highlighted the ongoing efforts to work with all stakeholders to accelerate reform-led development and secure Pakistan’s energy future.

Financial analysts see the Rs659.6 billion transaction as a landmark, signaling that Pakistan’s capital markets are capable of supporting large debt transactions, a critical factor in maintaining the liquidity and stability of the energy sector.

With this landmark arrangement, Pakistan moves one step closer to reducing cyclical debt, strengthening institutional credibility and laying the foundations for sustainable energy sector reform and economic growth.

Meanwhile, the government has completed the largest debt transaction in the capital markets, settling Rs659.6 billion ($2.3 billion) in power sector liabilities as part of the government’s ambitious plan to reduce chronic cyclical debt, Energy Minister Sardar Awais Ahmed Khan Leghari said on Wednesday. The settlement includes Rs 399.6 billion in acquisition of Pakistan Energy Sukuk (PES) I and II of Power Holding Limited through an off-market transaction in the trading market, alongside Rs 259.7 billion cleared from various syndicated financing facilities.

Through a post on X, the minister described it as a landmark transaction, a key component of the Rs1.225 trillion debt relief cycle, reflecting strong institutional confidence in Pakistan’s economic reforms, government initiatives and the depth of our capital and Islamic finance ecosystem. The government remains committed to structural energy sector reforms along with long-term fiscal stabilization and looks forward to the commitment of all stakeholders to accelerate reform-led growth.

Circular debt, the web of unpaid bills to power producers, fuel suppliers and distribution companies. It was one of the country’s most persistent financial vulnerabilities. It has increased over the years due to inefficient distribution companies, increasing capacity payments to power producers, electricity theft, delayed tariff adjustments and subsidies that exceeded fiscal allocations. The debt relief is in line with the structural reforms being promoted under the ongoing International Monetary Fund (IMF) Pakistan program.