Open AccessDynamics of Circular Debt in Pakistan and Its Resolution
Author(s) -
Syed Sajid Ali,
Sadia Badar
Publication year - 2010
Publication title -
the lahore journal of economics
Language(s) - English
Resource type - Journals
eISSN - 1811-5446
pISSN - 1811-5438
DOI - 10.35536/lje.2010.v15.isp.a4
Subject(s) - subsidy , economics , debt , external debt , internal debt , order (exchange) , government (linguistics) , monetary economics , macroeconomics , finance , market economy , linguistics , philosophy
This paper examines the circular debt problem in the Pakistanienergy sector. After presenting the profile of the energy sector in Pakistan,the paper explains why circular debt has emerged in the sector. Twoprincipal reasons are discussed for the circular debt problem: First,consumer tariffs were insufficient to recover the rising costs of powergeneration and the government (due to fiscal constraints) was notcompensating PEPCO for the resulting losses. Second, PEPCO has facedsignificant problems in recovering dues from consumers. In order to resolvethe circular debt problem, sharp adjustments in power tariffs may berequired combined with the need by the government to explicitly recognizethe costs of power subsidies in the budget.