ISLAMABAD: Pakistan’s power sector circular debt increased by Rs223 billion during the first five months of the current fiscal year, reaching Rs1.837 trillion by November 2025. The rise highlights continued financial stress in the energy sector despite recent agreements with commercial banks aimed at slowing the accumulation of unpaid liabilities.
Official data shows that circular debt stood at Rs1.614 trillion in June 2025 and rose to Rs1.693 trillion by September before climbing sharply to Rs1.837 trillion by November. A significant Rs144 billion increase occurred in just October and November, raising concerns over the effectiveness of short term financing measures.
This surge came even after the government signed agreements with 18 commercial banks in September 2025 to raise Rs1.225 trillion for partial retirement of circular debt. The loans carry a six year tenure and will be repaid in 24 quarterly installments, financed through a Rs3.23 per unit surcharge imposed on electricity consumers nationwide.
On a year on year basis, however, there has been some improvement. Circular debt stood at Rs2.381 trillion in November 2024, meaning the current stock is lower by Rs544 billion. Officials attribute the reduction to repayments, restructuring of liabilities and improved cash flow management over the past year.
Earlier in June 2025, the federal cabinet approved a broader financing plan to borrow Rs1.275 trillion from commercial banks to clear dues of independent power producers and the Power Holding Company. Of this amount, Rs683 billion was allocated specifically to settle Power Holding Company payables.
The borrowing carries an interest rate of three month KIBOR minus 0.9 percent with an annual repayment cap of Rs323 billion. Officials warned that if interest rates rise, the overall repayment burden could increase to Rs1.938 trillion. Analysts say the continued buildup of circular debt reflects deep rooted structural issues such as high system losses, weak recovery and heavy reliance on consumer surcharges.
