Pakistan’s power sector circular debt jumps by Rs233 billion in five months

2026-01-26 - 08:44

ISLAMABAD – The circular debt of Pakistan’s power sector has surged to Rs1.837 trillion after witnessing an increase of Rs223 billion during the first five months (July-November) of the current fiscal year 2025-26. It appears that the government’s efforts to tackle the debt, including agreements signed with commercial banks in September 2025, failed to yield results and contain swelling circular debt. An increase of Rs144 billion was recorded only in just October and November, raising doubts about the effectiveness of short-term solutions being implemented by the government. Official figures show that the circular debt stood at Rs1.614 trillion in June 2025. By September, it had jumped to Rs1.693 trillion and further increased to Rs1.837 trillion by November, reflecting an increase of Rs223 billion during the first five months of FY2026. However, on a year-over-year basis, the circular debt showed improvement. By November 2025, it had decreased by Rs544 billion compared to November 2024, when it had peaked at Rs2.381 trillion, due to repayments and restructuring. In an effort to manage the debt, the federal government secured loans worth Rs1.225 trillion from 18 commercial banks in September 2025, with a six-year repayment plan. These loans will be repaid via a Rs3.23 per unit surcharge on electricity consumers, while a separate plan was approved in June to borrow Rs1.275 trillion for clearing liabilities of independent power producers.