Power sector debt increases to Rs1.84 trillion in Pakistan

Pakistan’s power sector circular debt jumped by Rs224 billion in the first eight months of the fiscal year, reaching Rs1.837 trillion by February 2026.

It climbed from Rs1.614 trillion in June 2025. In addition, the Power Division noted a slight drop to Rs1.798 trillion in March, signalling short-term stability. The good news is year-on-year figures improved. The debt decreased by Rs693 billion from a peak of Rs2.531 trillion in February 2025, thanks to repayments and effective restructuring.

Furthermore, the government secured Rs1.225 trillion from 18 commercial banks in September. This six-year bond, to be repaid in 24 equal quarterly instalments, comes through a Rs3.23 per unit surcharge for electricity bills. The government remains optimistic about achieving zero net debt growth by the end of the fiscal year under its Circular Debt Management Plan.

They say daily and monthly fluctuations won’t cost consumers. There are operational gains too distribution firms reduced inefficiencies by Rs48 billion from July to February (compared to the previous year) as a result of the tough controls. The big plan is to replace high-cost debts with low-cost loans to cut interest costs. Reforms will reduce the debt stock over six years.

But there are risks, particularly from K-Electric in Karachi. Its arrears to the government jumped to Rs365 billion in February 2026, a 67% increase from Rs218 billion in June 2025. That includes Rs169 billion principal and Rs195 billion interest, which has accumulated due to a court ruling halting tariff payments.