Pakistan’s power sector circular debt is poised to reach Rs 1.9 trillion, rising from Rs 1.689 trillion recorded in the first half of the 2025-26 fiscal year, signaling renewed stress in the country’s energy sector finances.
The debt stock jumped sharply to Rs 1.889 trillion as of February 28, 2026, with liabilities tied to China-Pakistan Economic Corridor (CPEC) power projects reaching a record Rs 543 billion, according to Business Recorder.
The nearly Rs 200 billion increase in just two months has been attributed to lower recoveries and higher system losses compared to targets set by the National Electric Power Regulatory Authority (Nepra). The surge has also raised fresh concerns for the International Monetary Fund (IMF) regarding its potential impact on the broader economy.
Earlier, officials had pledged to reduce circular debt to Rs 1.614 trillion by the end of the current fiscal year, while medium-term targets have now been revised to Rs 1.346 trillion by June 2027.
To curb the rising debt, the government recently approved a Rs 200 billion technical supplementary grant as equity support for distribution companies. Meanwhile, consumers continue to shoulder a debt service surcharge of Rs 3.23 per unit.
The circular debt issue is expected to remain a key policy challenge as Pakistan continues discussions with the IMF on energy sector reforms and prepares for Nepra’s public hearing on fuel charge adjustments for February 2026.
