New SAPM on Revenue Suggests PHL Loans to Be Converted to Investments

The newly Appointed Special Assistant to Prime Minister (SAPM) on Revenue, Dr Waqar Masood, has proposed that loans of Power Holding Limited (PHL) should be converted into the government’s capital investment instead of public debt, a national daily reported on Monday sourcing anonymous Finance Ministry officials.

Prior to his appointment as SAPM, Dr Masood was heading the subsidy cell in the Finance Division and is now being said to play a more critical role in the economic decision making.

On October 14, Finance Division informed the Economic Coordination Committee (ECC) that following negotiations with the International Monetary Fund (IMF), the ECC had approved shifting of the power sector debt stock of Rs. 804 billion to Public Debt, on May 6. Accordingly, the Finance Division was to make repayments of the same amount to lenders through Power Holding Limited (PHL), to the extent of the principal amount as and when due through cash or financial instruments.

The loan amounting to Rs. 82 billion taken by Fl-IL from OGDCL and included in the debt stock of Rs. 804 billion, being payable to a PSE, was required to be considered separately.

According to the debt re-payment schedule agreed between PHL and lending institutions, the amount of Rs. 72.635 billion was required to be paid partially during the FY 2019-20 and the remaining was payable in 2020-21 as principal repayments to lenders.

Dr Waqar Masood highlighted that one of the primary reasons for the power sector circular debt was the inefficiency of distribution companies (Discos). He has been the Principal Accounting Officer of Finance Division during PPP and PML(N) regimes and is therefore privy to the irregularities in the subsidy mechanism. He also revealed details of such irregularities at a recent briefing to Prime Minister Imran Khan.

According to the news report, he said that balance sheets of Discos had a weak financial position, and so it was advisable that disbursement or payment of the public debt be done as a capital investment into Discos instead of converting that debt into a public loan.

However, Adviser to Prime Minister on Institutional Reforms and Austerity Dr Ishrat Husain was of the opinion that similar injections were also given to Discos in the past but they did not reap the desired results due to the inherent weaknesses of Discos to improve recovery and reduce losses.

Following these discussions, the ECC constituted a committee under the chairmanship of Dr Ishrat Hussain, including Dr Masood along with the Finance Division and Power Division officials to deliberate on the matter.

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