ECC approves Rs659.6bn guarantee for Power Holding Company debt settlement

• HRIS phase-out is gradual, contingent on FY26 review.
• SBP caution prevails; no abrupt HRIS cutoff.
• Mari gas move stabilises fertiliser availability and pricing.

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet approved a Rs659.6 billion government guarantee to settle Power Holding Limited (PHL) debt and to phase out subsidies under the Home Remittance Incentive Scheme (HRIS) by 2027, The News reported.

The government guarantee of Rs659.646 billion will be issued to PHL to cover loans and payments to IPPs as part of Rs1.225 trillion circular debt financing. The committee said the measures aim to ensure the energy sector’s financial sustainability, expedite settlement of outstanding dues, and reduce costs for consumers.

The Council was informed that the central bank had asked for gradually abandoning the incentives for the remittances scheme.

The Ministry of Finance had allocated Rs100 billion for it as a subsidy in the current fiscal year. The State Bank of Pakistan (SBP) recommended against the abrupt cessation of HRIS due to the risk of major disruption in home remittances. Instead, a gradual rationalisation plan should be put in place on the outcomes of FY26 and then any revisions is suggested.

In the normal scenario, where the momentum in home remittances is not severely impacted (beyond 10%) due to the recent revisions in HRIS, the government may consider phasing out the schemes beyond FY27, subject to an evaluation. The ECC met under the chairmanship of Senator Muhammad Aurangzeb, Federal Minister for Finance and Revenue, at the Finance Division.

On the Petroleum Division’s proposal, the ECC approved the allocation and pricing of gas from Mari Fields to fertiliser plants to ensure an adequate and affordable supply of fertiliser on a structural basis.

The ECC took up a summary submitted by the Power Division for rationalisation of tariffs and payment adjustments for nuclear power plants (NPPs), government-owned power plants (GPPs), OGDCL and SNGPL.

The committee endorsed the agreed framework among the entities concerned for the settlement of outstanding dues and waiver of specific financial claims to support fiscal balance and tariff rationalisation.

The ECC also considered and approved another summary by the Power Division for issuance of a Rs659.646 billion government guarantee for circular debt financing of Rs1.225 trillion.

In another decision, the committee considered and approved a summary from the Finance Division for gradually phasing out the HRIS. The ECC endorsed a phased, data-driven approach to ensure stability in remittance inflows and to avoid any abrupt disruption that could adversely impact the economy.

It was further decided that the government may consider completing the phase-out process beyond FY27, subject to a review of remittance performance and the outcomes of the FY26 revisions.

Among administrative decisions, the ECC approved over Rs960 million for the Ministry of Interior and sought a report from the CDA on the future of PWD staff. A summary from the Ministry of Maritime Affairs regarding the use of PIBT was deferred.