ISLAMABAD: The Ministry of Energy’s Power Division has clarified reports of a massive increase of Rs 223 billion in the circular debt. In its clarification issued today, the Power Division rejected reports of Rs 223 billion rise in circular debt. The Power Division called the figures inaccurate, misleading, and lacking factual context.
The Power Division spokesperson responded to a media report that suggested circular debt flows increased by Rs223 billion between July and November 2025, despite a bank refinancing agreement signed in September 2025. The spokesperson said the report relied on outdated data and was published without seeking the department’s official position.
Officials added that the comparison presented in the report created a distorted picture. They explained that comparing the circular debt stock as of June 30, 2025, with the end-November 2025 figures is inappropriate because the latter reflects only three months of activity. As a result, the conclusions drawn in the report could not reflect the true trend.
Seasonal Factors and Data Comparisons Clarified
The Power Division clarified that analysts should compare the July–November 2025 period with the July–November 2024 period to ensure an accurate assessment. The spokesperson noted that seasonal factors often influence circular debt flows during specific months. However, such temporary increases are typically reversed by the end of the fiscal year. The statement also emphasized that the reported variation was incorrectly linked to bank agreements, which primarily aimed to replace expensive PHPL debt with cheaper financing repayable over five to six years.
Moreover, officials confirmed that circular debt flow declined in December 2025. Consequently, the net circular debt flow for July–December 2025 remained below Rs80 billion, which reflects improving financial discipline in the power sector.
Government Cites Reforms and Long-Term Debt Strategy
The Power Division highlighted that circular debt stock fell significantly during FY2024–25 and stood at Rs1,614 billion by June 2025. Authorities attributed this improvement to better DISCO operational efficiency, stronger macroeconomic conditions, and the waiver of late payment interest after successful negotiations with IPPs. In addition, DISCO inefficiencies declined by Rs193 billion during FY2024–25 compared to the previous year, while inefficiencies during July–December 2025 dropped by another Rs49 billion year-on-year.
Looking ahead, officials expressed confidence that the circular debt position will remain fully contained by the end of the current fiscal year. They confirmed that the Rs1,225 billion Circular Debt Settlement Plan will be implemented over six years to refinance existing stock on favorable terms. The spokesperson also stressed that seasonal variations in circular debt do not affect electricity tariffs and therefore have no impact on consumer-end pricing.
