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Spokesperson of Power reference to the news item published in a section of media(TechJuice not included), which reports that the Circular Debt (CD) flow increased by Rs. 224 billion during the period from Jul-Nov 2025, despite the bank refinancing agreement signed in Sep-2025, declared it as misleading
According to the spokesperson, comparing the circular debt stock at the end of June 2025 with that of November 2025, a span of only five months, is misleading. The recent bank agreement, the spokesperson clarified, was intended primarily to replace expensive loans for the Pakistan Hybrid Power Limited (PHPL) with cheaper financing on a five- to six-year repayment schedule, and is not directly tied to the short-term fluctuations in circular debt.
Officials further noted that circular debt typically shows seasonal variations, and comparisons for short periods should ideally be made against the same months of the previous year. The increase reported from July to November 2024, for example, was largely due to predictable seasonal factors and was generally reversed by the fiscal year-end.
The Power Division highlighted that circular debt actually declined in December 2025, resulting in a net increase of less than Rs. 80 billion for the six-month period from July to December 2025. The overall stock of circular debt had already fallen to Rs. 1,614 billion as of June 2025, following improvements in distribution companies’ operational efficiency, macroeconomic stability, and the waiver of late payment interest after successful negotiations with independent power producers.
Officials said the government expects to fully contain circular debt by the end of the current fiscal year, in line with historical trends where seasonal fluctuations typically normalize in the latter half of the year. They also clarified that these seasonal movements do not affect consumer electricity tariffs.
In addition, inefficiencies in distribution companies were reduced by Rs. 193 billion in FY 2024-25 compared to the previous year, with further reductions of Rs. 49 billion reported for July to December 2025 compared to the same period in 2024.
The government has also launched a Rs. 1,225 billion circular debt settlement plan to be implemented over six years. Under this program, the existing debt will be refinanced on more favorable terms, with the first tranche already received. The plan is expected to fully eliminate the stock of circular debt over the six-year period and discontinue the debt service surcharge.
