ISLAMABAD: Pakistan’s power sector circular debt rose by Rs75 billion in the first half of the current fiscal year despite significant capital injections and large-scale commercial borrowing, highlighting persistent structural weaknesses in the energy system.
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Official data from the power division showed that circular debt increased to Rs1.689 trillion by the end of December 2025, marking a 4.65 per cent rise during July–December FY26. The debt stock had stood at Rs1.614tr at the close of the previous fiscal year on June 30, 2025, after being reduced through capital injections of Rs780bn and commercial borrowing of around Rs1.225tr.
The data indicated that circular debt rose sharply by Rs79bn in the first quarter ending September 30, 2025, before easing marginally in the second quarter. During October–December, the debt stock declined by Rs4bn, largely due to stock payments amounting to Rs224bn, in addition to Rs801bn paid during FY25.
However, performance indicators presented a mixed picture. System inefficiencies increased by Rs101bn over six months, while non-payments by K-Electric surged to Rs115bn. Total receivables from the Karachi-based utility reached Rs329bn by December 31, including Rs136bn in principal and Rs193bn in markup.
Payables to power producers also rose, increasing from Rs861bn at the end of FY25 to Rs903bn in the first half of FY26. Circular debt financing during the period amounted to Rs694bn, while budgeted but unreleased subsidies declined by Rs42bn. Interest charges dropped significantly to Rs10bn from Rs56bn a year earlier due to reduced holding company debt and settlements with independent power producers.
Read More: Power sector circular debt rises by Rs79bn
A power division spokesperson attributed the rise in debt to seasonal factors, noting that such fluctuations typically reverse later in the fiscal year. He expressed confidence that circular debt would be fully contained by year-end, with no net addition to the overall stock, citing improved Disco efficiencies, favourable macroeconomic conditions and ongoing refinancing under a six-year settlement plan.