ISLAMABAD: Pakistan’s power sector has seen a concerning increase in its circular debt, with an additional Rs. 224 billion added in the first eight months of the current fiscal year, according to official documents from the Power Division.
From July 2025 to February 2026, the total circular debt in the power sector surged from PKR 1614 billion to PKR 1837 billion, reflecting the ongoing financial challenges facing the energy sector. This marks a substantial rise, even as efforts to address the issue continue.
Despite agreements signed in September 2025 with banks to reduce circular debt by Rs. 1225 billion, the debt has continued to grow. The latest figures reveal that the circular debt increased by another Rs. 144 billion between October 2025 and February 2026, underscoring the persistence of the problem.
The circular debt crisis involves unpaid dues between various entities in Pakistan’s energy sector, including power generation companies, fuel suppliers, and distribution companies. This financial burden continues to strain the sector and has far-reaching implications for the country’s economy, particularly in terms of energy supply and costs.
Experts warn that the prolonged rise in circular debt poses a serious threat to the stability of Pakistan’s power sector, with the potential for increased energy prices and further financial instability for power companies. They emphasize the need for more effective and sustainable solutions to address the root causes of the debt accumulation.
As the fiscal year progresses, the government faces growing pressure to implement concrete measures to stabilize the sector and prevent further escalation of circular debt, which has remained a significant hurdle to economic growth and energy security.
