Pakistan’s power sector circular debt increased by Rs. 240 billion during the first 10 months of fiscal year 2025-26, reaching Rs. 1.85 trillion by April 2026, according to data compiled by Arif Habib Limited from Ministry of Energy figures.
The latest figures show that circular debt stood at Rs. 1.85 trillion in April 2026, slightly higher than the Rs. 1.84 trillion recorded in February 2026. However, the overall debt stock remained significantly below the Rs. 2.41 trillion reported in April 2025.
During the July-April period of FY26, circular debt growth accelerated sharply, rising by 1,233 percent compared with an increase of only Rs. 18 billion recorded during the same period of the previous fiscal year.
The increase was largely attributed to the continued underperformance of power distribution companies (DISCOs). Distribution losses and under recoveries collectively contributed around Rs. 226 billion to the circular debt buildup, although under recoveries showed improvement compared with previous years.
The report also highlighted increased payments to Independent Power Producers (IPPs), with stock payments reaching Rs. 236 billion during the period, up from Rs. 151 billion in the corresponding period last year. The higher payments indicate improved liquidity conditions within the power sector.
As part of its circular debt management strategy, the government continued implementing refinancing measures introduced in December 2025. Authorities shifted debt previously parked in Pakistan Holding Limited (PHL) into bank financing facilities and created a separate financing category for improved transparency.
By April 2026, repayments totaling Rs. 96 billion had been made under the financing arrangement. The refinancing initiative aims to reduce borrowing costs by replacing existing liabilities with financing linked to KIBOR minus 0.9 percent.
Despite the increase recorded during FY26, the overall circular debt stock remained more than 23 percent lower than the level recorded a year earlier, reflecting progress in addressing the long-standing financial challenges facing Pakistan’s energy sector.
