Financial sector should play role to resolve energy crisis in the country

Karachi: Acting Governor, State Bank of Pakistan Yaseen Anwar Monday stressed on financial sector to play its due role in resolving ongoing energy crisis in the country, which is hampering business activities and life of common man. “An early resolution of this critical issue is in interest of all, including banking industry,” he observed.

Presiding over Chief Executives of banks meeting at SBP, Karachi convened to resolve problems being faced by Independent Power Projects IPPs, he assured banks that SBP will facilitate them in case they require any regulatory support for early resolution of circular debt crisis. Prime Minister’s high-powered committee is focusing on remedial steps to develop long term solution of energy crisis, he said and emphasized quick remedy is sought to overcome immediate financial requirement.

Abdullah Yusuf Chairman, IPPs Advisory Council & representatives of IPPs briefed on severity of issue and identified factors behind crisis. They said government is considering short, medium term options for resolving energy crises on a sustainable basis, which include possibilities like use of coal as substitute to oil, gas import as raw material and construction of small hydel power projects.

A SBP press release said during discussions, it was felt that issues being faced by IPPs are primarily driven by paucity of short-term liquidity. A number of proposals were presented to banks for addressing issues including allocation of working capital limits to PEPCO, extension of L/C time period from 60 to 90 days for IPPs and conversion of outstanding circular debt into long term Pakistan Investment Bonds (PIBs).

While appreciating government’s sincerity in early resolution of issue, banks suggested government should first focus on resolution of its direct circular debt of Rs 300 billion through issuance of PIBs on priority basis, whereas financing to individual IPPs (existing & incremental) will be taken care of by banks individually on case-to-case basis. They proposed government may look into possibility of incremental financing through PIBs, which is considered to be more viable and would help distribute responsibility for financing to a larger number of banks, DFIs.

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