Pakistan Power Circular Debt Rises Rs224 Billion to Rs1.84 Trillion

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, raising concerns over persistent financial pressures in the energy sector.

According to the Power Division, circular debt rose from Rs1.614 trillion in June 2025, although it eased to Rs1.798 trillion in March, suggesting some short-term stabilization.

Despite the increase, the debt burden showed year-on-year improvement, falling by Rs693 billion from Rs2.531 trillionrecorded in February 2025, following repayments and restructuring measures.

As part of efforts to manage the debt, the government secured Rs1.225 trillion in financing from commercial banks, backed by a Rs3.23 per unit electricity surcharge imposed on consumers to service the loan.

Officials say the government remains committed to achieving zero net addition to circular debt by the end of the fiscal year under its Circular Debt Management Plan, while also reducing inefficiencies in distribution companies through governance reforms.

The government is also pursuing refinancing and structural reforms to lower borrowing costs and gradually reduce the circular debt stock over the next six years.

However, risks remain, particularly due to rising dues linked to K-Electric, whose liabilities reportedly climbed to Rs365 billion by February 2026, driven by unpaid principal and markup obligations.

Analysts say while recent measures have provided some relief, long-term resolution will depend on sustained reforms, improved recoveries, and addressing structural weaknesses in the power sector.

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