Pakistan, June 20 -- The Government of Pakistan has signed a major financial deal worth Rs1.275 trillion ($4.5 billion) with 18 commercial banks to reduce the country's mounting power sector debt. The financing, based on Islamic principles, comes at a critical time when the sector is weighed down by unpaid bills, subsidies, and liquidity shortages. These issues have not only caused energy supply disruptions but also put pressure on the economy, making debt reduction a key part of the country's ongoing $7 billion IMF programme.

Khurram Schehzad, adviser to the finance minister, confirmed that the funds will be provided through Islamic financing, structured at a concessional rate of 3-month KIBOR minus 0.9%. The arrangement was approved by...