Pakistan’s fuel oil circular debt causing power shutdowns in summer peak

11 Jul 2017   Climate, Pakistan

Disruption to Pakistan’s domestic trade flows of fuel oil due to almost $5 billion of circular debt is swelling stocks and causing severe power shutdowns during the country’s peak summer demand season. Fuel oil accounts for close to 40% of fuel consumption in Pakistan’s power sector, which is grappling with increasing load shedding and power cuts, a costly economic fallout for the industrial and manufacturing industries. Circular debt in Pakistan’s energy sector has been an ongoing issue since 2008. Debt-burdened power utilities cannot make timely payments to the country’s oil suppliers, who in turn cannot meet their international payment obligations, leading to a credit crunch and supply disruptions. Power producers are grappling with widespread electricity theft, payment delays and defaults by their customers — including government offices and state-owned companies — and high downstream subsidies that prevent them from recovering the costs of fuel purchases, power generation and distribution. […]

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