Power Division officials have addressed recent media reports highlighting a Rs. 224 billion increase in circular debt between July and November 2025, calling the coverage misleading. A spokesperson clarified that comparing circular debt stock over a short five month period does not reflect the full context of the fiscal and operational changes underway. The recent bank refinancing agreement signed in September 2025 was primarily aimed at replacing high cost loans for Pakistan Hybrid Power Limited with more affordable financing on a five- to six-year repayment schedule, and it is not directly linked to short-term debt fluctuations reported during that period.
Officials noted that circular debt in Pakistan tends to exhibit seasonal variations, and short-term comparisons should ideally be made against the same months of previous years to capture accurate trends. They cited July to November 2024, where similar seasonal patterns caused temporary increases in debt that were largely reversed by fiscal year-end. The division highlighted that circular debt actually declined in December 2025, resulting in a net increase of less than Rs. 80 billion for the six-month period from July to December. As of June 2025, the overall stock of circular debt had already been reduced to Rs. 1,614 billion, following improved operational efficiency in distribution companies, macroeconomic stability, and the waiver of late payment interest after negotiations with independent power producers.
Further improvements in distribution efficiency were also noted, with Rs. 193 billion reduced in FY 2024-25 compared with the prior year, and an additional Rs. 49 billion reduction recorded between July and December 2025 compared to the same period in 2024. The officials emphasized that these efficiencies, coupled with structural and financial interventions, are aimed at maintaining stable electricity tariffs for consumers despite seasonal fluctuations in circular debt. The government has launched a Rs. 1,225 billion circular debt settlement plan to be implemented over six years, which will refinance existing debt under more favorable terms and eliminate the debt service surcharge. The first tranche of this settlement plan has already been received.
Authorities reaffirmed that the government expects to fully contain circular debt by the end of the current fiscal year, consistent with historical trends where temporary seasonal increases are normalized in the latter half of the year. They stressed that the short-term increase reported by some media outlets does not accurately reflect the ongoing structural reforms, financing strategies, and efficiency measures aimed at reducing the stock of circular debt and strengthening the sustainability of Pakistan’s energy sector. By maintaining operational oversight and implementing the long-term settlement plan, the government intends to ensure financial stability within the power sector while supporting consistent supply and tariff structures for consumers.
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