ISLAMABAD: Pakistan’s power sector circular debt increased by Rs224 billion during the first eight months of the current fiscal year, reaching Rs1.837 trillion by February 2026, up from Rs1.614 trillion in June 2025.
According to the Power Division, the rise is largely attributed to seasonal and timing-related factors. The debt stock, however, showed slight improvement in March, easing to Rs1.798 trillion, indicating short-term stabilization.
On a year-on-year basis, the situation has improved significantly. The circular debt has declined by Rs693 billion from its peak of Rs2.531 trillion recorded in February 2025, primarily due to repayments and restructuring measures undertaken by the government.
In a key move to control the growing debt, the government secured Rs1.225 trillion in financing from 18 commercial banks in September. The loans, structured over six years and repayable in 24 quarterly installments, are being serviced through a Rs3.23 per unit surcharge imposed on electricity consumers.
Officials maintain that the government is on track to achieve zero net addition to circular debt by the end of the fiscal year under its Circular Debt Management Plan, emphasizing that monthly fluctuations do not necessarily increase the burden on consumers.
Operational efficiency in the power sector has also improved. Losses and inefficiencies in power distribution companies (DISCOs) declined by Rs48 billion during July–February compared to the same period last year, reflecting improved governance and stricter enforcement.
The government’s broader strategy includes refinancing high-cost liabilities with lower-interest debt to reduce financial pressure, alongside structural reforms aimed at gradually bringing down the circular debt over the next six years.
However, challenges remain. Karachi-based utility K-Electric’s outstanding dues to the government surged to Rs365 billion by February 2026, marking an increase of over 67% from Rs218 billion in June 2025. The liabilities include Rs169 billion in principal and Rs195 billion in markup, largely accumulating after the company obtained a court stay on its multi-year tariff, suspending payments to the government.
Story by Israr Khan
