Circular debt drops 29% to Rs1.6tr

September 22, 2025 (MLN): Pakistan's power sector circular debt stood at Rs1.661 trillion as of July 2025, representing a significant 29.3% decrease from Rs2.351tr recorded in July 2024, according to data compiled by Arif Habib Limited, citing Ministry of Energy sources.

However, the debt has shown an upward trajectory in recent months, rising by Rs47 billion during the fiscal year-to-date period ending July 2025, compared to a reduction of Rs42bn in the same period last year.

Outstanding Power Circular Debt Position

Component
Jul-25
Jun-25
MoM
Jul-24
YoY
Payables to power producers
908
861
5.5%
1,561
-41.8%
GENCOs' payable to fuel suppliers
93
93
0.0%
107
-13.1%
Amount Parked in PHL
660
660
0.0%
683
-3.4%
Total
1,661
1,614
2.9%
2,351
-29.3%

All figures in PKR billion

Break-up of Increase/(Decrease) - FYTD

Factor
Jul-25
Jun-25
Jul-24
Budgeted but unreleased subsidies
35
28
22
Unbudgeted/(unclaimed) subsidies
-
-
-
Interest Charges (PHL+IPPs)
-
58
40
Pending Generation Cost (QTAs+FCA)
(6)
(85)
(63)
Non Payment by K-Electric
3
4
(1)
DISCO Losses Inefficiency
41
265
64
DISCO Under Recoveries
46
132
83
Other Adjustments (Prior Year Recovery, etc)
(72)
(358)
(188)
Sub Total (a)
45
(42)

Payment through Fiscal Space - FYTD

Component
Jul-25
Jun-25
Jul-24
PHL Principal Repayments
-
(24)
-
PHL Unpaid markup
-
-
-
Stock Payments
-
(801)
-
Sub Total (b)
-
(825)
-
Total
47
(780)
(42)

All figures in PKR billion; Source: Ministry of Energy (Power), AHL Research

The circular debt primarily comprises payables to power producers totaling Rs908bn, which decreased 41.8% YoY from Rs1.561tr.

GENCOs' payables to fuel suppliers account for Rs93bn, down 13.1% from Rs107bn in July 2024. Additionally, Rs660bn remains parked in Pakistan Holding Limited (PHL), showing minimal change from the previous year.

The primary factors contributing to the Rs47bn increase during the current fiscal year include:

• Distribution Companies' (DISCOs) underperformance issues totaling Rs87bn, comprising Rs41bn in losses due to inefficiency and Rs46bn in under-recoveries
• Budgeted but unreleased subsidies of Rs35bn
• Pending generation costs and other operational adjustments

These increases were partially offset by other adjustments worth Rs72bn related to prior year recoveries.

The current debt level, while still substantial, represents a notable improvement from the peak of Rs2.351tr recorded in July 2024. The YoY reduction of nearly Rs700bn suggests some progress in addressing the structural issues plaguing Pakistan's power sector.

The circular debt crisis has been a persistent challenge for Pakistan's energy sector, affecting power generation capacity, investment climate, and overall economic stability. 

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