Pakistan, July 28 -- In a major step to revive the energy sector, the government will reduce Pakistan's circular debt from Rs2.3 trillion to Rs561 billion. This debt cut comes after securing Rs1,275 billion from 18 commercial banks and fulfills a key agreement made with the International Monetary Fund (IMF). Officials plan to disburse the funds within this or next week to ease the burden on the power sector.

According to sources, the Central Power Purchase -G (CPPA-G) will use the loan to repay Rs683 billion in Power Holding Limited (PHL) loans. It will also clear Rs569 billion in interest-based arrears owed to independent power producers (IPPs). Once payments are made, the circular debt figure will drop significantly and be officially u...