Pakistan’s power sector circular debt surged by Rs. 223 billion during the first five months of the current fiscal year, reaching Rs. 1.837 trillion by November 2025, according to official data.
The increase was observed despite the federal government signing agreements with commercial banks in September 2025 to contain the debt. Between October and November alone, circular debt grew by Rs. 144 billion, raising concerns about the effectiveness of short-term measures.
Month-Wise Circular Debt Trend
Data shows that circular debt stood at Rs. 1.614 trillion in June 2025, rose to Rs. 1.693 trillion by September, and further increased to Rs. 1.837 trillion in November, reflecting a net rise of Rs. 223 billion between July and November.
However, on a year-on-year basis, the overall stock of circular debt showed some improvement. By November 2025, total circular debt was Rs. 544 billion lower than in November 2024, when it peaked at Rs. 2.381 trillion, primarily due to repayments and restructuring efforts.
Government Measures to Reduce Circular Debt
In September 2025, the federal government signed agreements with 18 commercial banks to raise Rs. 1.225 trillion to reduce circular debt. The loans carry a six-year tenure and will be repaid in 24 quarterly instalments.
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Officials confirmed that repayment of these loans will be financed through a Rs. 3.23 per unit surcharge imposed on electricity consumers.
Earlier, in June 2025, the federal cabinet approved a broader plan to borrow Rs. 1.275 trillion from commercial banks to settle independent power producers’ (IPPs) liabilities and clear dues of the Power Holding Company.
Out of this total borrowing, Rs. 683 billion has been allocated specifically for Power Holding Company payables. The financing carries an interest rate of three-month KIBOR minus 0.9 per cent, with an annual repayment cap of Rs. 323 billion.
Analysts Highlight Ongoing Challenges
Despite government interventions, the continued rise in circular debt underscores the structural challenges facing Pakistan’s power sector, including inefficiencies in billing, payments, and revenue collection from electricity consumers.
Experts warn that without long-term reforms, circular debt is likely to remain a persistent issue affecting the financial sustainability of the energy sector.
