Pakistan’s Power Circular Debt Rises Rs. 224 Billion in 8 Months to Rs. 1.84 Trillion
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Pakistan’s power sector circular debt rose by Rs. 224 billion in the first eight months of the current fiscal year, reaching Rs. 1.837 trillion by February 2026.
It increased from Rs. 1.614 trillion in June 2025, although the Power Division said the figure eased to Rs. 1.798 trillion in March, indicating some short-term stabilization.
On a year-on-year basis, however, the debt burden improved significantly, falling by Rs. 693 billion from a peak of Rs. 2.531 trillion in February 2025 following repayments and restructuring measures.
As part of efforts to contain the debt spiral, the government secured Rs. 1.225 trillion from 18 commercial banks in September. The six-year financing facility, repayable in 24 quarterly installments, is being serviced through a Rs. 3.23 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 necessarily translate into an additional burden on consumers.
Operational performance in the sector has also improved, with inefficiencies in distribution companies shrinking by Rs. 48 billion during July to February compared with the same period last year, reflecting tighter governance and enforcement measures.
The government’s broader strategy centers on refinancing expensive liabilities with cheaper borrowing to reduce interest costs, while pursuing structural reforms aimed at gradually lowering the circular debt stock over the next six years.
Still, risks remain, particularly from Karachi-based K-Electric, whose unpaid dues to the government climbed to Rs. 365 billion by February 2026, up more than 67% from Rs. 218 billion in June 2025.
Those liabilities include Rs. 169 billion in principal and Rs. 195 billion in markup, largely accumulating after the utility obtained a court stay on its multi-year tariff, halting payments to the government.
