ISLAMABAD, PAKISTAN: Pakistan’s power sector has once again been pulled back into familiar territory as the country’s circular debt rose to Rs1.693 trillion in the first quarter of the ongoing fiscal year — an increase of Rs79 billion from July levels, despite repeated commitments of structural reform and financial discipline.
The latest quarterly report released by the Power Division shows that payables to power producers surged to Rs944 billion, up from Rs861 billion at the start of the fiscal year. Legacy arrears, however, remained frozen at Rs660 billion, indicating that the core problem continues to stem from ongoing inefficiencies rather than past liabilities.
Major contributors to the rising stock include under-recoveries by distribution companies totalling Rs87 billion, operational inefficiencies of around Rs84 billion, and hefty interest charges amounting to Rs67 billion within just three months. Additionally, receivables from K-Electric reached Rs229 billion, including sizeable mark-up components.
Officials argue that while the quarterly increase appears troubling, it mirrors patterns from previous years where the first quarter typically sees pressure before stabilisation. They insist that last year’s substantial reduction — nearly Rs780 billion — demonstrates the government’s capacity to reverse the tide, provided upcoming quarters deliver improved recoveries and stricter performance monitoring.
Energy sector analysts, however, caution that recurring spikes in circular debt signal deeper structural weaknesses that require far more than periodic financial injections or tariff adjustments. Without addressing governance failures, transmission losses, and revenue leakages within distribution companies, the debt spiral is likely to persist — ultimately affecting supply reliability, investor confidence, and fiscal sustainability.
The renewed rise once again places the spotlight on Pakistan’s long-standing power sector woes, highlighting the gap between reform rhetoric and on-ground performance.
This story has been reported by PakTribune. All rights reserved.