Circular debt described as threat to economy

October 28, 2015 Off By Web Desk

KARACHI: United Business Group (UBG) on Thursday said circular debt has emerged as a threat to economy which must be settled without wasting time. The Rs 600 billion debt is a great discouragement for investors and has potential to hit Pakistan’s ranking on various indexes, it added.

The debt should be settled by receiving outstanding amount from defaulters so that masses and business community should not suffer, said UBG leader and presidential candidate for FPCCI Abdul Rauf Alam. Speaking to the business community, he said that power sector should be made to stand on its feet otherwise it will bring country down.

Rauf Alam, who is also Chairman of the Founder Group of ICCI said that power system weaknesses are translating into losses of Rs200 billion annually while Rs40 billion are being paid as interest. Power sector distribution losses have climbed to 18.2 percent to Rs50 billion while defaulters including federal and provincial governments owe Rs628 billion to power sector.

He said that government and IMF have agreed to settle circular debt in three years, it would be brought down to 218 billion in 2016-17 and 204 billion during the next year. Similarly losses would be reduced by 1.5 percent while recoveries will be improved by five percent.

Lauding the move, he underlined need to keep masses insulated from the impact. The business leader said that during 2015 government spend 40 percent of its income on debt servicing, 17 percent on development and 20 percent on defence. He said that Finance Minister should resolve issue of bank tax so that trading community should play their role in national development with peace of mind.