Pakistan Power Division Blames Finance Ministry for Rs61 Billion Rise in Circular Debt
Pakistan's power division has attributed a Rs61 billion increase in the power sector's circular debt to budget deductions made by the Ministry of Finance. This pushed the total circular debt to Rs1.675 trillion as of June 30, 2026, up from Rs1.614 trillion a year prior. The power division stated that a Rs98 billion budget deduction, part of austerity measures, significantly impacted the sector's finances. Had the full allocated budget of Rs893 billion been received, the circular debt would have decreased to Rs1.577 trillion. The sector had previously seen a reduction in circular debt from Rs2.393 trillion in FY24 to Rs1.614 trillion in FY25. Furthermore, losses incurred by power distribution companies have been reduced from Rs591 billion in FY24 to Rs326 billion in the current fiscal year, a decrease of Rs265 billion over two years. The power division claims these reductions demonstrate the effectiveness of ongoing reforms and that the budget cut was a temporary financial issue, not an operational decline. The government is committed to reducing circular debt under its International Monetary Fund program, having met its end-December 2025 targets.
This situation highlights a systemic tension between fiscal austerity measures and the operational financial health of critical infrastructure sectors like power. The power division's argument suggests that budget allocations are a key lever for managing circular debt, implying that short-term fiscal adjustments can have significant, compounding financial consequences in the energy sector. The International Monetary Fund's focus on debt reduction underscores the broader economic stability concerns. The effectiveness of reforms hinges on consistent financial support and the resolution of inter-ministerial budgetary disputes. Future policy must balance immediate fiscal pressures with the long-term sustainability and reliability of the energy supply, considering how such financial mechanisms interact with market dynamics and consumer affordability in the evolving energy landscape.
AI-generated to prompt reflection — not editorial opinion, not advice, not a statement of fact. How this works.