Pakistan’s power sector circular debt has reached Rs1,798 billion by the end of financial year 2025-26, with a major payment standoff involving K-Electric preventing what could have been a substantial Rs175 billion reduction, according to official figures presented to the Cabinet Committee on Energy.
The Power Division revealed that K-Electric’s failure to clear outstanding dues totaling Rs171 billion—comprising Rs148 billion in Central Power Purchasing Agency invoices and Rs23 billion in late payment surcharges—has emerged as the primary obstacle to meaningful debt reduction. An additional Rs13 billion in fuel cost power surcharges has further constrained efforts to bring down the mounting liabilities.
Despite these setbacks, the circular debt position showed marginal improvement, coming in Rs4 billion below the targeted Rs1,802 billion. However, the actual gross flow of circular debt reached Rs420 billion, overshooting the Rs400 billion target by Rs20 billion.
In a positive development, distribution companies demonstrated improved efficiency. Losses from transmission, distribution inefficiencies, and under-recoveries totaled Rs176 billion—significantly better than the projected Rs254 billion, representing a favorable variance of Rs78 billion.
The Cabinet Committee on Energy, which had mandated quarterly reporting on billing, collections, and circular debt in its January 14, 2025 meeting, has now directed the Power Division to pursue all available organizational channels to enhance financial performance. The committee emphasized the urgent need for improved operational efficiency and expenditure reduction to ultimately lower electricity costs for consumers.
The National Electric Power Regulatory Authority has been tasked with ensuring data integrity in all circular debt reports. Meanwhile, the Finance Division has suggested that the K-Electric payment dispute should be resolved through mechanisms outlined in relevant Nepra regulations.
Power distribution companies’ performance was reviewed against Nepra targets and compared with previous year benchmarks during the recent committee meeting. Officials presented verified circular debt data for both the third quarter (January-March 2026) and the complete financial year ending June 30, 2026.
The cabinet body has reiterated its directives for the Power Division to accelerate power sector reforms to prevent future slippages and deficits. Ministry officials assured the committee that all necessary measures would be implemented to address the circular debt challenge, which continues to strain Pakistan’s energy sector finances and burden consumers with higher electricity tariffs.
The ongoing circular debt crisis remains one of Pakistan’s most persistent economic challenges, affecting the government’s ability to maintain stable power supply while keeping electricity affordable for households and businesses across the country.
