Govt admits rise in power sector circular debt by Rs61bn

ISLAMABAD: The government on Tuesday acknowledged that power sector circular debt flow has increased by Rs61 billion during the fiscal year 2025-26.

The government had given a commitment to the International Monetary Fund (IMF) that circular debt stock would be contained to Rs1.614 trillion as of June 30, 2026.

In an official statement, the Power Division said that Pakistan’s power sector witnessed a significant reduction in circular debt during FY2024-25, falling from Rs2,393 billion in FY2023-24 to Rs1,614 billion, reflecting the impact of ongoing structural reforms.

READ MORE: Power sector circular debt: Govt cuts a sorry figure before IMF

According to official figures, the federal government had allocated Rs893 billion for the power sector in the FY2025-26 budget. However, a cut of Rs98 billion in the allocated amount adversely affected the pace of debt reduction.

Power Division spokesperson said that had the full budgeted allocation been released to the Power Division, circular debt would have further declined to Rs1,577 billion. Instead, due to the shortfall of Rs98 billion, circular debt increased by Rs61 billion during the current fiscal year.

“The financial performance of power distribution companies (DISCOs) has also improved notably. The losses, which stood Rs591 billion in FY2023-24, have declined by Rs193 billion to Rs397 billion in FY2024-25. During the ongoing fiscal year, these losses have been further reduced to Rs 326 billion,” the spokesperson added.

Overall, the Power Division has successfully brought down losses by Rs265 billion over two years—from Rs591 billion to Rs326 billion—demonstrating a sustained improvement in operational efficiency.

Spokesperson Officials maintained that this reduction clearly indicates that reforms in the power sector are yielding tangible results and their positive impact continues to persist. They emphasised that the recent increase in circular debt is primarily due to a one-time budgetary constraint rather than any deterioration in sector performance.

The Power Division reiterated its commitment to continuing reform efforts aimed at ensuring financial sustainability of the energy sector while enhancing reliability for consumers.

Recently, the Power Division presented two options: (i) release of the full Rs97.649 billion as advance subsidies against future tariff differential claims, along with adjustment of TESCO’s TDS arrears of Rs44.198 billion against outstanding subsidy advances; or (ii) release of Rs53.451 billion as advance subsidy and Rs44.198 billion specifically for TESCO arrears.

The ECC considered the summary dated June 16, 2026, titled “Release of Rs152 billion TSG as equity in Power Distribution Companies and re-appropriation of available budget,” and partially approved the proposal, allowing Rs54.451 billion after adjusting Rs97.549 billion from the total Rs152 billion.

Copyright Business Recorder, 2026