Pakistan’s Power Circular Debt Stands at Rs1.66 Trillion in July

ISLAMABAD: Pakistan’s power sector circular debt stood at Rs1.66 trillion in July 2025, marking a sharp 29.3% drop year-on-year compared to Rs2.35 trillion in July 2024, according to data compiled by Arif Habib Limited (AHL). However, the debt stock recorded a 2.9% monthly increase over June. The biggest share of liabilities came from payables to power producers, which reached Rs908 billion. Analysts note that while long-term debt reduction is encouraging, persistent inefficiencies in DISCOs, unreleased subsidies, and under-recoveries continue to add pressure on the sector, making circular debt one of Pakistan’s toughest economic challenges.

Key Highlights of Circular Debt – July 2025

• Total circular debt: Rs1.66 trillion (↓ 29.3% YoY, ↑ 2.9% MoM)
• Payables to power producers: Rs908 billion (↓ 41.8% YoY, ↑ 5.5% MoM)
• GENCOs’ payables to fuel suppliers: Rs93 billion (↓ 13.1% YoY)
• Power Holding Limited (PHL) debt: Rs660 billion (unchanged MoM, ↓ 3.4% YoY)

Breakup of Additions to Circular Debt

• Budgeted but unreleased subsidies: Rs35 billion (↑ from Rs28bn in June)
• DISCO losses and inefficiencies: Rs41 billion
• Under-recoveries by DISCOs: Rs46 billion
• Non-payment by K-Electric: Rs3 billion
• Pending cost adjustments (QTA + FCA): ↓ Rs6 billion
• Prior year recoveries/adjustments: ↓ Rs72 billion

Net monthly increase: Rs47 billion in July

Financing Plan to Retire Circular Debt

• The Power Division has sought Prime Minister Shehbaz Sharif’s presence at the signing of agreements with banks to raise Rs1.225 trillion in loans.
• This financing package, cleared by the boards of Discos, CPPA-G, Finance Division, and Power Division, is aimed at retiring part of the circular debt, which currently hovers near Rs1.7 trillion, down from Rs2.5 trillion previously.
• According to officials, all codal formalities and guarantees are complete with 18 banks on board.

Experts caution that while the reduction in circular debt compared to last year is a positive sign, structural reforms in DISCOs, timely release of subsidies, and efficient cost recovery remain essential. Without these measures, Pakistan risks seeing its circular debt spiral again despite short-term financing interventions.

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