ISLAMABAD (Dunya News) — Pakistan’s power sector circular debt rose by Rs75 billion in the first half of the current fiscal year, reaching Rs1.689 trillion by the end of December, despite large capital injections and more than Rs1.225 trillion in commercial borrowing last year, official data shows.
At the close of FY25 on June 30, circular debt stood at Rs1.614 trillion after being reduced through Rs780 billion in government capital support and commercial loans obtained at reportedly lower interest rates. The stock increased by Rs79 billion in the first quarter ending September 2025, before edging down by Rs4 billion in the October–December period due to stock payments of Rs224 billion.
Power division figures indicate that system inefficiencies grew by Rs101 billion over six months, while non-payments by K-Electric surged to Rs115 billion. Total receivables from the Karachi-based utility reached Rs329 billion by December 31, including Rs136 billion in principal and Rs193 billion in markup.
Payables to power producers climbed from Rs861 billion at the end of FY25 to Rs903 billion over the following six months. Circular debt financing during the first half of the current fiscal year amounted to Rs694 billion.
Officials said a Rs42 billion reduction in unreleased subsidies and lower interest charges — down to Rs10 billion from Rs56 billion a year earlier — helped limit the increase. A power division spokesperson attributed recent fluctuations to seasonal factors and said the Rs1.225 trillion bank borrowing was aimed at replacing high-cost debt with cheaper, longer-term financing through the Power Holding Private Limited.
The spokesperson expressed confidence that the circular debt stock would be fully contained by the end of the fiscal year, citing improved operational efficiencies, better macroeconomic conditions and agreements with power producers to waive late payment interest. The government’s six-year refinancing plan for the existing debt is underway, with the first tranche already received.