ISLAMABAD: The Ministry of Finance has identified the rising circular debt in the energy sector as a *major fiscal challenge, warning that its continued growth threatens *economic stability.
According to official documents, the circular debt stood at Rs4,700 billion as of *December 2024, with *Rs2,400 billion attributed to the power sector and Rs2,300 billion to the gas sector.
The ministry cautions that the government lacks a clear strategy or financial capacity to resolve the crisis. With *limited room for tariff adjustments, the *mounting debt is expected to *hinder development spending, **increase borrowing needs, and further strain *fiscal sustainability.
“If unresolved, circular debt will necessitate subsidies, bailouts, or debt restructuring, adding further pressure on the economy,” the ministry warned, noting that the federal budget lacks specific provisions to tackle the issue.
Experts emphasize the urgent need for a transparent and credible strategy to *contain and eliminate circular debt, ensuring *long-term financial stability in the energy sector.
Story by Rana Ghulam Qadir
