Islamabad: The Economic Coordination Committee’s (ECC) decision to reallocate Rs50 billion from the Public Sector Development Programme (PSDP) to the Power Division marks a significant policy shift, reflecting the government’s urgent focus on meeting IMF targets and addressing the chronic circular debt (CD) crisis in Pakistan’s energy sector.
The government is planning to erase circular debt, with funding from banks and other resources. One of the payment source is the shifting of funds form other pools to the circular debt payments.
Reallocation of PSDP Funds
- Rs50 billion is being redirected from PSDP to power sector subsidies.
- This reallocation is intended to support the government’s circular debt reduction target of Rs337 billion by June 2025, as agreed with the IMF.
- The shift aligns with a broader trend of repurposing development funds to plug fiscal gaps under IMF programs, potentially impacting infrastructure and long-term development projects.
Solarisation of Agricultural Tube Wells in Balochistan
- Target: Solarize 27,000 agri tube wells, offering up to Rs2 million compensation per unit for off-grid transition.
- Total cost: Rs55 billion, shared 70% by the federal government and 30% by Balochistan.
- Rs14 billion has already been released via a Technical Supplementary Grant (TSG).
- Rs24.5 billion more is being channeled from power subsidies to implement the initiative.
Operational Challenges
- QESCO is facing material retrieval delays due to security issues in Balochistan.
- Area clearance by the provincial government is necessary before implementation.
- First third-party validation report is expected by mid-May 2025, and further review by ECC is planned.
Read More: Govt Seeks Massive Bank Loan to Tackle Circular Debt Crisis
Implications:
For Development:
- Redirecting PSDP funds could hinder progress on core infrastructure, health, and education projects.
- It reflects the growing opportunity cost of sustaining unsustainable power subsidies.
For Power Sector Reform:
- The solarisation initiative aligns with long-term sustainability goals, but requires robust oversight, especially given the complex security and logistical environment.
For IMF Compliance:
Shows the government’s commitment to meeting conditional fiscal and energy reforms required under IMF programs, even if it means sacrificing development allocations.
Also Read: Circular Debt to Rise by Rs. 100 Billion
This decision again underscores the IMF-driven reprioritization of fiscal resources—from development to stabilization.
