Govt admits circular debt in power sector climbed by PKR 61bn

The government on Tuesday acknowledged that power sector circular debt increased by PKR 61 billion during FY2025-26, attributing the rise to a reduction in budgeted funding rather than a deterioration in sector performance.

 

According to the Power Division, circular debt had declined from PKR 2.393 trillion in FY2023-24 to PKR 1.614 trillion in FY2024-25, in line with structural reforms. However, a PKR 98 billion cut in the FY2025-26 budget allocation prevented further debt reduction.

 

Officials said that had the full allocation been released, circular debt would have fallen to PKR 1.577 trillion. Instead, the funding shortfall resulted in a PKR 61 billion increase during the current fiscal year.

 

The Power Division also highlighted improved financial performance by distribution companies (DISCOs), with losses declining from PKR 591 billion in FY2023-24 to PKR 397 billion in FY2024-25, and further to PKR 326 billion in FY2025-26. Over two years, cumulative losses have been reduced by PKR 265 billion, reflecting ongoing operational improvements.

 

The government reiterated that reforms remain on track and said the recent increase in circular debt was driven by a one-off budgetary constraint, while reaffirming its commitment to improving the energy sector's financial sustainability.