Fuel Payments.

The government's decision to impose Rs30 billion worth of taxes to make up for an impending default from Pakistan State Oil (PSO) was an expected decision in light of the severe financial crunch the state is facing. The current account deficit and the inability to increase our foreign reserves means that we are currently spending more than we are earning. This is particularly critical given Pakistan's energy import needs.

PSO will be provided with a supplementary injection of Rs30 billion immediately to make some of the payments by the end of August. However, the total value of outstanding payments is Rs270 billion by August 28-which means that this 30 billion is little more than a drop in the ocean at this point. In contrast, the money PSO needs to receive stands at Rs607 billion-if the payments owed to it were made on time, PSO would have no problem paying off its own suppliers.

This shows us that the problem of circular debt in the fuel sector is a recent one of our own making. Gas companies such as Sui Northern provided costly gas to use for domestic consumers, but only recovered a fraction of the amount from the end users. The outcome of this...