Pakistan’s power sector continues to face financial strain as circular debt surged by Rs79 billion during the first quarter (July–September) of FY2025-26, reaching a staggering Rs1.693 trillion by the end of September. Officials have attributed the increase to seasonal and operational factors, though experts warn of deeper structural issues.
Circular debt the persistent shortfall caused by unpaid subsidies, losses, and inefficiencies has long been one of Pakistan’s biggest economic challenges. Although the government managed to reduce Rs780 billion in debt by the end of the previous fiscal year, the recent spike highlights ongoing weaknesses in billing recovery, power theft, and inefficiency across distribution companies (Discos).
According to the Power Division, the Rs79 billion increase must be “viewed in context,” as similar fluctuations were recorded in the previous year’s opening quarter. The ministry expressed confidence that the trend would reverse over the remainder of the fiscal year.
“The current quarterly rise is attributable to seasonal and operational factors that typically influence monthly flows and are expected to reverse over the course of the year,” said a Power Division spokesperson.
However, energy analysts argue that the rise reflects lingering inefficiencies, weak recoveries, and governance issues in the power sector. Receivables from K-Electric alone reached Rs229 billion, including Rs42 billion in principal and Rs187 billion in markup, further adding to the debt pressure.
Experts warn that if reforms are not accelerated, the debt could surpass Rs1.8 trillion by early 2026, straining public finances and potentially leading to higher power tariffs for consumers.
“Without real accountability in distribution companies and timely payments from consumers and government departments, circular debt will continue to spiral,” noted an Islamabad-based energy economist.