Pakistan, Oct. 6 -- Refinancing has cooled Pakistan's power sector debt, but it has not stopped the leak. The fix lies in finance that pays only for results.

Every month, Pakistan's honest electricity consumers pay for more than the power they use. Tucked into each bill is Rs3.23 per unit to service a Rs1.225 trillion bank loan that retired old power sector arrears. They also pay, less visible, for electricity that was stolen, lost in worn-out wires, or consumed by people who never paid.

This is circular debt: the chain of unpaid bills running from consumers to distribution companies, then to the government's power purchaser, to power producers and finally to fuel suppliers. When one link fails to pay, every link after it fails too.

Th...