ISLAMABAD: Pakistan's power sector circular debt recorded an increase of Rs240 billion in the first 10 months (July-April) of the current fiscal year, reaching Rs1.854 trillion, compared to Rs1.614 trillion in June 2025. However, compared to the same period of the previous fiscal year, the circular debt declined by Rs557 billion to Rs1.837 trillion in the July-April period of the ongoing fiscal year from Rs2.531 trillion during the same period last year, primarily due to capital injections by the government, official data revealed.
Circular Debt Accumulation Details
According to the data, the accumulation of circular debt during the first 10 months of the ongoing fiscal year increased to Rs240 billion, compared to Rs18 billion in the same period of the previous fiscal year. Payables to power producers increased to Rs933 billion at the close of April, up from Rs861 billion at the start of the ongoing fiscal year 2025-26. However, compared to Rs1.649 trillion in payables to power producers by end-April of the previous fiscal year 2024-25, it declined by Rs557 billion.
The debt of Rs660 billion parked in the Power Holding Company of the Power Division as of June 2025 was brought down to zero during the first 10 months (July-April) of the ongoing fiscal year. It stood at Rs683 billion during the first 10 months of the previous fiscal year. However, in December, the federal government completed Power Holding Limited (PHL) settlements.
Inefficiencies and Under Recoveries
According to the data, the circular debt increased by more than Rs226 billion due to inefficiencies and under recoveries by the Ex-Wapda distribution companies (Discos) during the first 10 months of FY2025-26. However, this was significantly lower than Rs397 billion and Rs293 billion under the same account in June 2025 and the same period of previous FY2024-25, respectively.
K-Electric Receivables
Receivables from K-Electric as of end-April 2026 reached Rs363 billion, including a principal amount of Rs164 billion and about Rs199 billion in markup, the data revealed. Notably, the federal government reduced circular debt by Rs780 billion last year through capital injections. The circular debt was slashed to Rs1.614 trillion in June 2025, the final month of FY2024-25, compared to Rs2.394 trillion in the same period last year. Similarly, the government also entered into loan agreements with 18 banks for Rs1.225 trillion in commercial borrowing.
Power Division Spokesperson's Clarification
A spokesperson of the Power Division released a statement saying that it is misleading to call the accumulation of Rs240 billion in circular debt an increase. “In fact, it is actually the flow of circular debt, which is distinct from the stock of circular debt. The flow is affected by different seasonal factors including government budget releases, settlements, KE payments, etc., which after settlement bring the flow back to its normal position. The flow in a particular month or few months cannot and shall not determine the final stock of circular debt. The government always submits and sticks to the circular debt management plan, where the flow is clearly reflected,” he said.
“As at the end of June 2026, the stock will most probably be at 1,614 billion rupees, reflecting zero increase at the close of the financial year. The reporting of circular debt flow and projecting it as an increase or decrease will not reflect the true position. Therefore, instead of reporting April 2026 circular debt flow, it is advisable to wait for just a few days and report on the entire year to save readers from any confusion,” the spokesperson claimed.
Circular Debt Management Plan
As of April 2026, circular debt stood at Rs1,854 billion, primarily due to outstanding payments by K-Electric to CPPA-G against power producer invoices, along with delays in the release of government subsidies. However, as envisaged in the Circular Debt Management Plan, supported by stringent recovery measures and loss-reduction targets assigned to DISCOs, the government aims for zero net addition to circular debt by the end of the fiscal year.
It is worth mentioning that the operational performance of DISCOs has improved considerably, resulting in a reduction of Rs66 billion in inefficiencies during July–April FY 2025-26 compared to the corresponding period of FY2024-25. This progress reflects the government’s continued commitment to strengthening governance, enhancing sector performance, and promoting financial sustainability and discipline across the power sector, the spokesperson added.
