Pakistan’s power circular debt falls 29% to PKR 1.6T in July

Pakistan’s power sector circular debt stood at PKR 1.6 trillion in July, down by 29.3% year-on-year compared to PKR 2.3 trillion in July 2024, according to the Ministry of Energy’s data.

The circular debt — which essentially is the gap between the cost of generating electricity and bill recovery — has long strained the country’s fiscal space and investor confidence.

The year-on-year decline in circular debt in July follows a similar dip the previous month, when the government disbursed PKR 801 billion to power producers.

The decrease in July was mainly due to the reduction in payments to power producers. The outstanding amount stood at PKR 1.56 trillion in July 2024, but was reduced by PKR 653 billion — or 41.8% — to PKR 908 billion in the same month this year.

The generation companies’ (GENCOs) payables to fuel suppliers fell from PKR 107 billion to PKR 93 billion in July year-on-year, while the debt parked in Power Holding Limited fell from PKR 683 billion to PKR 660 billion.

While the circular debt fell year-on-year in July, it increased by 2.9% from PKR 1,614 billion in June.

In July alone, the outstanding payments increased by PKR 47 billion, compared to a reduction of PKR 42 billion in the same period last year, primarily driven by DISCOs’ losses and lower recoveries of around PKR 87 billion.