Circular Debt Reaches Rs1.675 Trillion
Pakistan’s power sector circular debt increased by Rs61 billion during the 2025-26 fiscal year.
The debt reached Rs1.675 trillion by June 30. It stood at Rs1.614 trillion one year earlier.
The Power Division blamed the increase on budget reductions by the Ministry of Finance.
It said a Rs98 billion budget cut prevented the sector from reducing its outstanding debt.
The figures exclude the circular debt linked to K-Electric.
Power Division Blames Rs98 Billion Funding Cut
The Power Division said Rs893 billion had initially been allocated to the power sector for FY2025-26.
However, the government later reduced the allocation by Rs98 billion under its austerity policy.
The effective power sector subsidy was consequently reduced to Rs795 billion.
According to the division, circular debt could have fallen to Rs1.577 trillion if the complete budgetary allocation had been released.
However, parliamentary budget documents presented a different allocation figure.
The documents showed that Rs1.036 trillion had originally been allocated for power sector subsidies. This amount was later revised to Rs893 billion during the presentation of the FY2026-27 budget.
The Power Division has not yet released its final annual financial report. The report remains subject to regulatory and statutory approval.
Distribution Company Losses Continue to Decline
Despite the increase in circular debt, the Power Division claimed that energy sector reforms were producing positive results.
Power distribution company losses stood at Rs591 billion in FY2023-24.
These losses declined by Rs193 billion to Rs397 billion in FY2024-25.
The division said losses were further reduced to Rs326 billion during FY2025-26.
Overall distribution losses have fallen by Rs265 billion over the past two years.
The Power Division said the improvement reflected stronger financial controls and effective sector reforms.
It described the budget reduction as a temporary financial issue rather than evidence of operational decline.
Under Pakistan’s programme with the International Monetary Fund, the government has committed to preventing further circular debt accumulation.
The government has also promised to gradually reduce the total circular debt stock.
The Power Division said it would continue implementing reforms to make the energy sector financially sustainable and reliable for consumers.
