ISLAMABAD (HRNW): Pakistan’s power sector is facing an escalating financial emergency, with official data revealing a substantial increase in circular debt. During the first eight months of the current fiscal year, from July 2025 to February 2026, the power sector’s circular debt rose by a staggering Rs. 224 billion, according to documents released by the Power Division.
The data indicates that as of February 2026, the total volume of circular debt reached Rs. 1,837 billion. This marks a sharp climb from the Rs. 1,614 billion recorded at the close of the previous fiscal year in June 2025.
Persistent Increases Despite Intervention:
The upward trend continued even after the government initiated major structural reforms and signed agreements in September 2025 aimed at reducing the debt by Rs. 1,225 billion. Following these initial efforts, when the debt stood at Rs. 1,693 billion, it further escalated by Rs. 144 billion between October 2025 and February 2026.
Sources highlight that systemic inefficiencies and low recovery rates are significant drivers of this persistent growth. The mounting circular debt not only strains the nation’s power infrastructure but also poses a critical challenge to Pakistan’s fiscal stability and its ongoing commitments to international financial institutions.
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