Pakistan, June 21 -- The government has signed term sheets with 18 commercial banks for a Rs1.275 trillion Islamic finance facility to help pay off the mounting debt in its power sector, Power Minister Awais Leghari said on Friday.

The government, which owns or controls much of the power infrastructure, is grappling with ballooning circular debt, unpaid bills and subsidies that have choked the sector and weighed on the economy. The liquidity crunch has disrupted supply, discouraged investment and added to fiscal pressure, making it a key focus under the $7 billion IMF programme.

"Finding funds to plug the gap has been a persistent challenge, with limited fiscal space and high-cost legacy debt making resolution efforts more difficult. Ei...