Rs79bn spike in CD? govt says it’s seasonal, not a setback

November 06, 2025 (MLN): The Ministry of Energy (Power Division) has clarified that the Rs79 billion increase in circular debt (CD) recorded during the first quarter of FY2025–26 does not reflect a renewed upward trajectory in the debt stock but rather a temporary, seasonal fluctuation.

Responding to interpretations suggesting that the increase signals a reversal of the government’s efforts to contain circular debt, the Power Division spokesperson categorically dismissed such impressions as inaccurate.

“The increase of Rs79 billion in Q1FY2025–26 must be seen in full context," according to the statement. 

During the same quarter last year, circular debt had increased by Rs73bn; however, by the end of that fiscal year, the overall stock of circular debt was reduced by Rs780bn, the statement added. 

The Ministry further added that the current quarterly rise is largely attributable to seasonal and operational factors that typically influence monthly cash flows within the power sector.

These include variations in electricity demand, payment cycles, and fuel cost adjustments, which are expected to normalise as the fiscal year progresses.

It further pointed out that, despite the quarterly increase, there has been a significant improvement in the performance of power distribution companies (DISCOs).

Inefficiencies within DISCOs during July–September 2025 were reduced by Rs67bn compared to the same period last year.

This reduction, the Ministry said, underscores the government’s ongoing efforts to enhance operational efficiency, strengthen governance, and maintain financial discipline across the power sector.

“The government remains firmly committed to its circular debt reduction plan and to ensuring financial sustainability through improved revenue recovery, loss reduction, and cost optimization,” the spokesperson stated.

Importantly, the Ministry assured that these interim, seasonal changes in circular debt have no direct impact on consumer-end tariffs, which continue to be determined by the National Electric Power Regulatory Authority (NEPRA) through the regular regulatory process.

The Power Division reaffirmed that the government’s strategy remains focused on sustainable debt management, performance-based reforms in DISCOs, and the long-term stabilization of Pakistan’s energy supply chain.

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