Pakistan’s power sector circular debt reached Rs. 1.85 trillion by April 2026, showing a slight increase from Rs. 1.84 trillion in February 2026, though it remains significantly lower than Rs. 2.41 trillion recorded in the same period last year.

Data compiled by Arif Habib Limited, based on Ministry of Energy figures, shows that circular debt rose by Rs. 240 billion during the first 10 months of FY2025–26, compared to an increase of just Rs. 18 billion in the corresponding period last year.

The rise was largely driven by ongoing inefficiencies in power distribution companies (DISCOs), with distribution losses and recovery gaps contributing around Rs. 226 billion. However, under-recoveries showed some improvement compared to previous years.

Payments to independent power producers (IPPs) also increased notably. Stock payments reached Rs. 236 billion during the period, up from Rs. 151 billion a year earlier, indicating improved liquidity flows within the power chain.

On the financing side, the government continued its circular debt management efforts through refinancing arrangements. A new structure introduced in the December 2025 report shifted previously parked liabilities from Pakistan Holding Limited (PHL) into bank financing, with Rs. 96 billion repaid against this facility by April 2026.

The refinancing plan aims to lower borrowing costs by replacing existing debt with loans linked to KIBOR minus 0.9 percent. Despite the yearly buildup, the total circular debt stock remains over 23 percent lower than April 2025, reflecting gradual progress in stabilizing the sector’s financial pressures.