Power sector circular debt drops Rs780 billion, Govt aims full clearance

Pakistan’s circular debt in the power sector fell by Rs780 billion over the past year, dropping to Rs1,614 billion by June 30, 2025, from Rs2,393 billion the previous year, the Power Division told the National Assembly.

The debt stock stood at Rs2,794 billion when the current government took office in March 2024. The reduction came through waivers on Rs260 billion in late payment interest, Rs193 billion savings from Disco inefficiencies, improved macroeconomic conditions, and resumed payments by K-Electric.

The government has launched a six-year plan to fully eliminate circular debt. It includes refinancing payables at KIBOR minus 0.9 percent, replacing current rates ranging from KIBOR –0.1 to +4.5 percent.

The initiative is expected to remove the Rs3.23 per unit Debt Servicing Surcharge and improve Disco efficiency through board reconstitution.