ISLAMABAD: Pakistan’s power sector circular debt surged by Rs224 billion in the first eight months of the current fiscal year, reaching Rs1.837 trillion by February 2026.
The stock, up from Rs1.614 trillion in June 2025, reflects seasonal and timing-related increases, though the Power Division said the figure eased to Rs1.798 trillion in March, signaling short-term stabilization. On a year-on-year basis, however, the debt burden has improved significantly, falling by Rs693 billion from a peak of Rs2.531 trillion in February 2025 due to repayments and restructuring measures.
In a major intervention, the government in September secured Rs1.225 trillion from 18 commercial banks to contain the debt spiral. The six-year loans, repayable in 24 quarterly installments, are being serviced through a Rs3.23 per unit surcharge on electricity consumers.
Officials say the government remains on track to achieve zero net addition to circular debt by the end of the fiscal year under its Circular Debt Management Plan, arguing that monthly fluctuations do not translate into additional consumer burden.
Operational performance has also shown improvement, with inefficiencies in distribution companies (DISCOs) shrinking by Rs48 billion during July–February compared to the same period last year, reflecting tighter governance and enforcement measures.
The broader strategy centers on refinancing expensive liabilities with cheaper debt to ease interest costs, alongside structural reforms aimed at gradually reducing the circular debt stock over the next six years.
However, risks persist. Karachi-based K-Electric’s unpaid dues to the government ballooned to Rs365 billion by February 2026, up more than 67% from Rs218 billion in June 2025. The liabilities include Rs169 billion in principal and Rs195 billion in markup, largely accumulating after the utility secured a court stay on its multi-year tariff, halting payments to the government.
