The circular debt in Pakistan’s power sector has seen a significant decrease of Rs1,065 billion during the first 16 months of the current government’s tenure, according to official records. This reduction marks a notable achievement in addressing one of the long-standing financial challenges within the energy sector.
The most substantial drop was recorded in June 2025 alone, where circular debt decreased by Rs856 billion compared to May 2025. This sharp decline brought the total circular debt down to Rs1,614 billion by the end of June 2025, signaling a remarkable turnaround in the sector’s financial health.
Data from the Power Division highlights that back in February 2024, the circular debt had reached a peak of Rs2,679 billion. Over the following months, the government implemented various measures to contain and reduce this mounting debt, which culminated in a reduction to Rs2,470 billion by the end of May 2025. This steady downward trend reflects ongoing efforts to streamline power sector finances and improve operational efficiencies.
The fiscal year 2024-2025 witnessed a total decrease of Rs779 billion in circular debt, underscoring consistent progress in tackling the issue. By the close of June 2024, circular debt was reported at Rs2,393 billion, which subsequently declined further as government initiatives took effect.
This reduction is critical for improving the sustainability of the power sector, ensuring timely payments to power producers, and ultimately contributing to a more stable energy supply for the country.
Circular debt, a persistent problem in Pakistan’s energy sector, arises when payments due to power producers are delayed or defaulted upon, causing a cascade of financial strain throughout the industry.
The reduction achieved under the current administration indicates a focused approach towards resolving these systemic financial bottlenecks, through improved governance, better tariff structures, and enhanced revenue collection mechanisms.
While challenges remain, the significant Rs1,065 billion decrease in circular debt over this period represents a positive development and a hopeful sign for the future stability and growth of Pakistan’s power sector. Continued vigilance and policy implementation will be essential to sustain this momentum and prevent future debt accumulation.
