ISLAMABAD: United Business Group (UBG) on Thursday said that circular debt has emerged as a serious threat to the economy which must be settled without wasting time. The Rs 600 billion debt is a great discouragement for investors and has the potential to hit Pakistan’s

ranking on various indexes.

The debt should be settled by receiving outstanding amount from defaulters so that the masses and the business community does not

suffer, said the UBG leader and presidential candidate for FPCCI, Abdul Rauf Alam. Speaking to the business community, he mentioned that the power sector must be made to stand on its feet otherwise it will bring country down. Rauf Alam, who is also the chairman of the Founder Group of ICCI, said that the weaknesses of the power sector are translating into losses of Rs200 billion annually while Rs40 billion are being paid as interest.

Power sector distribution losses have climbed to 18.2 percent to Rs 50 billion while defaulters including federal and provincial governments owe Rs 628 billion to the power sector. He also mentioned that the government and IMF have agreed to settle circular debt in three years, it would be brought down to 218 billion in 2016-17 and 204 billion during the next year. Similarly losses would be reduced by 1.5 percent

while recoveries will be improved by five percent.

Lauding the move, he underlined the need to keep the masses insulated from the impact. The business leader said that, in 2015, the

government had spent 40 percent of its income on debt servicing, 17 percent on development, and 20 percent on defence.

He said that the Finance Minister should resolve the issue of bank tax so that the trading community could play their role in national

development with peace of mind.