Pakistan’s power sector circular debt dropped by Rs. 779 billion, or nearly 33%, declining from Rs. 2.393 trillion in FY2023-24 to Rs. 1.614 trillion in FY2024-25, with the Power Division attributing the improvement to ongoing sector reforms.

In a statement issued on Tuesday, a spokesperson for the Power Division said the reduction in circular debt reflects the success of reform measures implemented across the electricity sector.

The spokesperson said the federal government had earmarked Rs. 893 billion for the power sector in the FY2025-26 budget. However, a subsequent Rs. 98 billion cut in the allocation prevented a further decline in circular debt.

According to the Power Division, had the full budgeted amount been released, circular debt would have fallen further to Rs. 1.577 trillion. Instead, the funding shortfall resulted in a Rs. 61 billion increase during the fiscal year.

The spokesperson also highlighted an improvement in the financial performance of power distribution companies (DISCOs). Their losses declined from Rs. 591 billion in FY2023-24 to Rs. 397 billion in FY2024-25, before falling further to Rs. 326 billion in FY2025-26.

Overall, DISCO losses have been reduced by Rs. 265 billion, or nearly 45%, over the past two years, the statement said.

The Power Division maintained that the latest figures demonstrate sustained progress in reforming the power sector, adding that the temporary increase in circular debt during FY2025-26 was the result of lower budgetary support rather than any deterioration in operational performance. It said reform efforts will continue to strengthen the sector’s financial sustainability and improve electricity services for consumers.