ISLAMABAD: Pakistan’s power sector circular debt increased by Rs61 billion in fiscal year 2025-26 after the government reduced budgetary support by Rs98 billion, offsetting improvements from ongoing sector reforms, the Power Division said.
The government originally allocated Rs893 billion for the power sector in the FY2025-26 budget but later slashed that amount by Rs98 billion, according to the ministry. Had the full allocation been released, circular debt would have declined further to Rs1.577 trillion, officials said. Instead, the funding reduction pushed the debt higher during the fiscal year.
The Power Division described the cut as a one-time fiscal measure and said it did not signal any weakening of the sector’s operational performance.
Despite the increase, reforms continued to strengthen key financial indicators, the ministry said. Circular debt fell by Rs779 billion in FY2024-25 to Rs1.614 trillion, down from Rs2.393 trillion a year earlier, marking one of the largest annual reductions in recent years.
Losses at power distribution companies, or DISCOs, also continued to narrow. They declined to Rs326 billion in FY2025-26 from Rs397 billion in FY2024-25, following a reduction from Rs591 billion in FY2023-24. Over the past two years, DISCO losses have been cut by Rs265 billion, the Power Division said, attributing the improvement to structural reforms across the electricity sector.
“The positive impact of power sector reforms continues to be reflected in the sector’s financial performance,” a Power Division spokesperson said. The reform agenda remains focused on improving efficiency, reducing losses and placing Pakistan’s energy sector on a financially sustainable footing, the spokesperson added.
