Pakistan’s circular debt in the energy sector has climbed to Rs5,206 billion, highlighting continued financial stress in the country’s power and gas systems, according to the latest figures cited in an International Monetary Fund (IMF) report.
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The report shows that the total circular debt includes Rs3,442 billion in the gas sector and Rs1,764 billion in the electricity sector. The combined figure reflects persistent structural challenges in Pakistan’s energy pricing, recovery mechanisms and subsidy framework.
The IMF report indicates that by early 2026, the accumulated debt in both gas and electricity sectors has continued to rise despite ongoing reform efforts. The energy sector remains one of the most financially strained segments of the economy, with mounting liabilities affecting overall fiscal stability.
Authorities have acknowledged the pressure and are implementing a series of reforms aimed at addressing inefficiencies. These include tariff adjustments, gradual removal of non-targeted subsidies and restructuring of existing energy sector debts.
Under commitments made in the IMF programme, the government has agreed to regular tariff revisions and a phased reduction of subsidies that are not directed at low-income consumers. Officials are also working to convert accumulated power sector debt into liabilities managed by the Central Power Purchasing Agency.
In addition, the government has introduced measures such as surcharges on electricity bills to help repay outstanding principal debt. These steps are intended to reduce the burden on the national budget while improving liquidity within the energy supply chain.
Despite these reforms, experts warn that rising circular debt continues to pose a major risk to long-term energy sector sustainability. They argue that structural inefficiencies, low recovery rates, and delayed tariff adjustments remain key challenges.
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The energy sector’s financial instability has also contributed to higher costs for consumers, affecting households and industries alike. Rising electricity and gas prices have become a significant concern amid broader inflationary pressures in the economy.
Officials say continued reform implementation and improved governance in the energy sector are essential to stabilise the situation and prevent further accumulation of debt.