Pakistan’s power sector circular debt has increased by Rs224 billion during the first eight months of the current fiscal year, raising concerns over the effectiveness of recent financial reforms.
According to documents from the Power Division, the circular debt stood at Rs1,837 billion by February 2026, compared to Rs1,614 billion in June 2025, reflecting a significant buildup despite government efforts to control it.
The data revealed that the debt stock was recorded at Rs1,693 billion in September 2025. However, even after agreements were signed with banks in September to reduce circular debt by Rs1,225 billion, the liability continued to grow.
Sources said that from October 2025 to February 2026 alone, circular debt increased by an additional Rs144 billion, indicating persistent structural challenges in the energy sector.
The rise in circular debt comes despite policy measures aimed at improving recoveries, reducing losses and restructuring financial obligations within the power sector.
Analysts say the continued accumulation of circular debt highlights deep-rooted inefficiencies, including transmission losses, poor bill recovery and high generation costs, which continue to strain the national exchequer.
The growing debt burden remains a key concern for economic managers, as it impacts fiscal stability and complicates efforts to ensure sustainable energy supply.