ISLAMABAD ( WNAM REPORT ): Pakistan Banks Association (PBA) Chairman Zafar Masud on Wednesday called the newly signed Rs. 1.225 trillion circular debt restructuring and financing agreement a “turning point” for Pakistan’s energy and financial sectors, emphasizing that the deal is a win for the government, the banking sector, the power industry, and above all, consumers.
Speaking at the signing ceremony at the Prime Minister’s House, attended by Prime Minister Shehbaz Sharif and key cabinet members, Masud clarified that the agreement introduces no new debt to the government and is designed to ease the country’s crippling circular debt burden — currently estimated at Rs. 2.4 trillion.
“This transaction is not merely a financial arrangement; it is a turning point for our energy and economic stability,” Masud said.
The facility, he explained, comprises Rs. 660 billion in restructuring of existing bank-held loans and Rs. 565 billion in fresh financing to settle overdue payments to power producers. This, according to Masud, has enabled the government to renegotiate better terms with energy companies, achieving savings of at least double the fresh financing amount.
Masud also addressed what he called “misconceptions” about the agreement. He clarified that:
• No new surcharge is being levied; instead, the existing Rs. 3.23 per unit debt service surcharge in consumer electricity bills will be redirected toward repayment.
• The markup rate is floating, not fixed, and set at KIBOR minus 90 basis points, which is about 150 basis points lower than current rates — a concession from banks.
• An effective interest rate cap protects the government from rising costs, while no lower floor has been imposed, offering flexibility in a declining interest rate environment.
• If interest rates fall further, early repayment will be possible, which would end the surcharge earlier and reduce electricity prices for consumers.
Masud also firmly rejected suggestions that the transaction was forced on banks.
“This is the largest syndication in the history of Pakistani banking — more than four times the size of the last restructuring and six times that of the last syndication,” he said.
He credited the six-month negotiation process to collaboration between the Ministry of Finance, the Ministry of Energy, the State Bank of Pakistan, the Central Power Purchasing Agency, and other stakeholders. He praised Prime Minister Sharif’s leadership for ensuring that the focus remained on public relief.
“This agreement is a textbook case of how aligned interests lead to successful execution,” he added.
Masud concluded by highlighting the broader economic impact: the release of Rs. 660 billion in sovereign guarantees will enable the government to redirect funds toward agriculture, SMEs, low-cost housing, education, and healthcare.
“When all parties work together beyond their vested interests and for the long-term benefit of society, the outcome is as promising as what we see today,” Masud said. “Everyone is a winner.”
