Pakistan has closed its largest banking transaction to date — a staggering Rs 1.29 trillion — in a decisive move aimed at confronting the country’s persistent power sector circular debt. Reported by Nasir Jamal in Dawn Media Group, this milestone reflects not just the sheer scale of financial coordination but also a broader commitment to restructuring an ailing energy ecosystem through a blend of structural fixes, enhanced digital oversight, and a purpose-built repayment framework.
The transaction is underpinned by a dedicated Debt Service Surcharge mechanism, designed to ensure consistent repayments to the banks that have shouldered this unprecedented exposure. The surcharge aims to stabilize cash flows within the power sector, thereby preventing future accumulation of unpaid liabilities that have long strained Pakistan’s economy.
Speaking on behalf of the banking fraternity, Zafar Masud, Chairman of the Pakistan Banks’ Association (PBA), highlighted the significance of this breakthrough. He underscored that the transaction is nearly four and a half times larger than any previous banking arrangement in the country’s history. Masud praised the banking sector for its professionalism, foresight, and collective willingness to prioritize the nation’s economic recovery over narrower interests.
“This represents the largest banking transaction in Pakistan’s history — nearly 4.5 times bigger than the previous largest transaction. The credit goes to Pakistan’s banking industry for demonstrating professionalism and commitment, and for taking a larger view of economic revival,” Masud remarked.
Yet, despite the optimism surrounding this financial engineering, Masud offered a stark caution. “The real battle is far from over. If we lose momentum, if governance reforms stall, if privatisation of Discos remains shelved, and if distribution efficiency falters, we risk ending up right back where we started,” he warned.
He further elaborated that circular debt is merely a symptom of deeper structural weaknesses. The core of the crisis lies in systemic inefficiencies, governance gaps, and delayed reforms that have allowed financial leakages to proliferate over years. The PBA chairman emphasized that while this mega transaction provides critical breathing space, it does not substitute for long-overdue measures needed to overhaul the power sector’s operational fabric.
The transaction’s reliance on digital oversight is another notable feature. By leveraging automated monitoring and financial tracking tools, stakeholders aim to inject greater transparency and accountability into the repayment flows — an area that has historically suffered from opaque practices and bureaucratic delays.
As Pakistan navigates this new phase, policymakers and financial leaders alike recognize that the durability of this solution hinges on sustained reforms. This means driving ahead with the restructuring of state-owned power distributors, improving billing and recovery mechanisms, and maintaining strict governance protocols to prevent old inefficiencies from resurfacing.
In many ways, this record-setting deal serves as both a financial backstop and a wake-up call. It demonstrates the banking sector’s willingness to step up for national stability but also highlights that without relentless focus on long-term fixes, Pakistan risks repeating a costly cycle.
The coming months will test whether this landmark transaction becomes the cornerstone of genuine, sustainable reform — or just another temporary patch on a deeply fractured system.