Pakistani consumers are set to benefit from a 10 percent reduction in electricity bills by 2031, following the government’s approval of a landmark Rs. 1.225 trillion circular debt elimination plan. Signed on Thursday, the agreement is the largest Islamic financing deal in the country’s energy sector and aims to retire Power Holding Limited (PHL) debt while clearing outstanding dues to Independent Power Producers (IPPs).
According to officials, once the loan is fully repaid—projected between 2029 and 2031—the Rs. 3.23 per unit Debt Service Surcharge (DSS) will be removed from consumer bills, offering direct financial relief.
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The deal, backed by 18 commercial banks and structured on Islamic finance principles, is expected to save the government up to Rs. 377 billion in late payment interest. It will also inject much-needed liquidity into the struggling power sector. The profit rate, officials noted, is set below conventional market levels, making the repayment model more sustainable and transparent compared to previous ad hoc bailouts.
The plan also highlighted rare cooperation between civilian and military leadership, with Army Chief Field Marshal Syed Asim Munir and Privatization Minister Muhammad Ali playing pivotal roles. While short-term relief in electricity bills may not materialize immediately, authorities emphasize that the long-term benefits will be significant, ensuring sectoral stability and restoring investor confidence.
