In a major step to reduce the power sector’s mounting circular debt, the government will sign a Rs1.225 trillion financing agreement today with a consortium of 18 commercial banks.

The agreement, with all required documentation now finalised, will be signed at the Prime Minister’s Office in Islamabad.

Prime Minister Shehbaz Sharif, currently in New York to attend the 80th UN General Assembly session, will participate in the ceremony via video link.

According to official sources, the government will be required to submit disbursement requests within 30 days of the signing.

Crucially, the return of any unutilised funds within this period will be mandatory, although an additional three-month window will be available to withdraw funds if needed.

Sources further clarified that the facility’s size will not increase, and the current tariff adjustment of Rs3.23 per unit will remain unchanged.

The Central Power Purchasing Agency-Guarantee (CPPA-G), which has invited stakeholders to the ceremony, confirmed that leading banks including Habib Bank, Meezan Bank, National Bank, Allied Bank, and UBL are part of the consortium.

Representatives of the World Bank, Asian Development Bank, and the International Monetary Fund will also attend the ceremony.

Senior officials from power sector entities such as Pakistan Holding Limited (PHL), LESCO, PESCO, SEPCO, and HESCO have been invited as well.

The financing facility is aimed at partially clearing the circular debt of the power sector, which has already surged to Rs1.7 trillion, according to the Power Division.