Pakistan’s Power Sector Debt Rises by Rs. 223 Billion Despite Bank Financing Deals

Pakistan’s power sector circular debt rose by Rs. 223 billion during the first five months of the current fiscal year, reaching Rs. 1.837 trillion by November 2025.

The increase was recorded even after the government signed agreements with commercial banks in September 2025 to contain the debt. During October and November alone, circular debt increased by Rs. 144 billion, raising concerns about the effectiveness of short-term measure, reported a national daily.

Official data shows that circular debt stood at Rs. 1.614 trillion in June 2025. It rose to Rs. 1.693 trillion by September and further increased to Rs. 1.837 trillion by November, reflecting a net rise of Rs. 223 billion between July and November.

However, on a year on year basis, the overall stock of circular debt showed some improvement. By November 2025, total circular debt was Rs. 544 billion, lower than in November 2024, when it had peaked at Rs. 2.381 trillion, mainly due to repayments and restructuring efforts.

In September, the federal government signed agreements with 18 commercial banks to raise Rs. 1.225 trillion to reduce circular debt. The loans carry a six-year tenure and will be repaid in 24 quarterly instalments.

Repayment of these loans will be financed through a Rs. 3.23 per unit surcharge imposed on electricity consumers, officials confirmed.

Earlier, in June 2025, the federal cabinet had approved a broader plan to borrow Rs. 1.275 trillion from commercial banks to settle liabilities of independent power producers and clear dues of the Power Holding Company.

Out of the total borrowing plan, Rs. 683 billion has been allocated specifically for Power Holding Company payables. The financing carries an interest rate of three-month KIBOR minus 0.9 percent, with an annual repayment cap of Rs. 323 billion.