Pakistan’s power sector circular debt rose by Rs. 224 billion in the first eight months of the current fiscal year to Rs. 1.837 trillion by February 2026, despite government efforts to contain the buildup, official data showed.

The stock increased from Rs. 1.614 trillion in June 2025, although the Power Division said it eased to Rs. 1.798 trillion in March, suggesting some short-term stabilization.

Compared with a year earlier, however, the debt burden was lower by Rs. 693 billion from a peak of Rs. 2.531 trillion in February 2025, reflecting repayments and restructuring measures.

To curb the buildup, the government secured Rs. 1.225 trillion from 18 commercial banks in September under a six-year financing arrangement repayable in 24 quarterly installments. The loans are being serviced through a Rs. 3.23 per unit surcharge on electricity consumers.

Officials say the government remains on track to achieve zero net addition to circular debt by the end of the fiscal year under its Circular Debt Management Plan, and argue that monthly fluctuations do not necessarily add to the burden on consumers.

The Power Division also said operational performance had improved, with inefficiencies in distribution companies narrowing by Rs. 48 billion during July-February compared with the same period a year earlier, helped by tighter governance and enforcement.

The government’s broader strategy includes refinancing costly liabilities with cheaper borrowing to lower interest expenses, while pursuing structural reforms aimed at reducing the circular debt stock over the next six years.

Risks remain, however, particularly from Karachi-based K-Electric, whose unpaid dues to the government rose to Rs. 365 billion by February 2026 from Rs. 218 billion in June 2025.

Those liabilities include Rs. 169 billion in principal and Rs. 195 billion in markup, largely accumulating after the utility secured a court stay on its multi-year tariff, halting payments to the government.