Power sector circular debt rises Rs224 billion to Rs1.84 trillion by February 2026

Pakistan’s power sector circular debt increased by Rs224 billion during the first eight months of the fiscal year, reaching Rs1.837 trillion by February 2026, according to official data.

The stock rose from Rs1.614 trillion in June 2025, driven by seasonal and timing-related factors, though the Power Division said it declined to Rs1.798 trillion in March, indicating short-term stabilisation.

On a year-on-year basis, the circular debt burden has reduced by Rs693 billion from Rs2.531 trillion in February 2025 due to repayments and restructuring measures.

In September, the government arranged Rs1.225 trillion in financing from 18 commercial banks to manage the debt stock. The six-year loans are being repaid through 24 quarterly instalments, funded by a Rs3.23 per unit surcharge on electricity consumers.

Officials said the government aims to achieve zero net addition to circular debt by the end of the fiscal year under its Circular Debt Management Plan, adding that monthly fluctuations are not expected to increase consumer burden.

Operational performance also improved, with inefficiencies in distribution companies reduced by Rs48 billion during July–February compared to the same period last year.

The strategy includes refinancing high-cost liabilities with lower-cost borrowing to reduce interest expenses, alongside structural reforms to gradually bring down the overall debt stock over the next six years.

However, liabilities linked to K-Electric have increased, with unpaid dues reaching Rs365 billion by February 2026, compared to Rs218 billion in June 2025. These include Rs169 billion in principal and Rs195 billion in markup, largely accumulated after the utility obtained a court stay on its multi-year tariff.