Power sector circular debt stood at Rs1.7tr in June 2026

August 19, 2026 (MLN): Pakistan's power sector circular debt stood at Rs1.68tr as of June 2026, slightly higher than Rs1.6tr in June 2025.

During FY26, the stock rose by Rs61bn, a sharp reversal from a decline of Rs780bn in the same period last year, primarily on account of DISCOs' underperformance of around Rs326bn (against Rs397bn in the same period last year) and non-payment by K-Electric worth Rs194bn (against just Rs4bn a year earlier).

Power sector under-recoveries improved markedly compared with previous levels, coming in at Rs64bn against Rs132bn in the same period last year.

Stock payments to independent power producers (IPPs), meanwhile, rose sharply to Rs302bn during the period, pointing to improved liquidity in the sector, according to data compiled by Arif Habib Limited (AHL) Research and Ministry of Energy (Power).

Source: Ministry of Energy (Power), AHL Research

On the break-up of the FY26 increase, DISCO losses inefficiency contributed Rs262bn, nearly flat against Rs265bn a year earlier.

Non-payment by K-Electric added Rs194bn, sharply higher than the negligible Rs4bn recorded in the same period last year.

DISCO under-recoveries stood at Rs64bn, well below Rs132bn a year earlier. Other adjustments, including prior-year recoveries, contributed Rs75bn, while unbudgeted/unclaimed subsidies subtracted Rs98bn.

Interest charges on PHL and IPP debt added Rs14bn, and loans principal repayment reduced the build-up by Rs129bn.

Pending generation costs under quarterly tariff adjustments and fuel cost adjustments trimmed a further Rs20bn.

Taken together, these factors produced a gross build-up of Rs364bn for the sub-total, sharply higher than the Rs45bn recorded in the same period last year.

On the payments side, stock payments to IPPs of Rs302bn were the sole offsetting item this year, down 62% from Rs801bn a year earlier when the government had also made PHL principal repayments of Rs24bn.

No PHL principal repayments or unpaid markup were recorded in the current period.

Net payments through fiscal space thus stood at Rs302bn, against the gross build-up of Rs364bn, leaving a net increase of Rs61bn in circular debt for FY26.

The report also noted that in December 2025, the government had introduced a new line item for CD financing worth Rs694bn, transferring Rs660bn previously parked in Power Holding Limited (PHL) to reflect bank financing.

Of this facility, Rs129bn had been repaid as of June 2026. The amount parked in PHL was required to be refinanced at lower rates of KIBOR minus 0.9%.

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