Pakistan’s power sector circular debt increased by Rs61 billion during fiscal year 2025-26, reaching Rs1.675 trillion by June 30, 2026, according to official data.
The circular debt stood at Rs1.614 trillion a year earlier. Inefficiencies and weak bill recoveries by power distribution companies (Discos) remained the biggest contributors to the buildup, collectively adding Rs326 billion during FY26.
According to Power Division data, operational inefficiencies at Discos contributed Rs262 billion to circular debt during the year, compared with Rs265 billion in FY25.
Weak recoveries added another Rs64 billion, although this marked a significant improvement from Rs132 billion recorded in the previous fiscal year.
K-Electric’s non-payment also emerged as a major contributor, adding Rs194 billion to the circular debt. The utility’s outstanding receivables reached Rs421 billion by June 2026, comprising Rs197 billion in principal and Rs224 billion in accumulated markup.
Another Rs63 billion was attributed to pending Water and Power Development Authority (Wapda) invoices related to amendments in power purchase agreements.
Meanwhile, interest payments owed to independent power producers, Power Holding Limited and circular-debt financing declined sharply to Rs14 billion in FY26 from Rs58 billion a year earlier.
Gross additions to circular debt during FY26 amounted to Rs609 billion. These were partially offset by Rs247 billion in reductions, including Rs98 billion in unclaimed subsidies, Rs129 billion in loan principal repayments and Rs20 billion in pending generation cost adjustments.
After these adjustments, the net circular-debt flow stood at Rs364 billion during the fiscal year. The government subsequently provided Rs302 billion in subsidy payments to reduce the accumulated debt.
As of June 30, 2026, outstanding amounts owed to power producers stood at Rs784 billion, while generation companies’ payables to fuel suppliers reached Rs90 billion. Circular-debt financing accounted for another Rs801 billion.
The latest figures highlight the continued financial pressure facing Pakistan’s power sector, with distribution losses, weak recoveries and outstanding payments remaining key challenges for reducing circular debt.
