Govt says Rs224bn circular debt rise is seasonal, no net increase seen by year-end

Pakistan’s Power Division on Monday pushed back against reports of a sharp rise in circular debt, saying a Rs224 billion increase recorded from July to November 2025 was driven largely by seasonal factors that typically unwind before the end of the fiscal year — a reversal it said had already begun in December.

In a statement, the division said circular debt growth slowed markedly in December 2025, bringing net additions for the July–December period to less than Rs75 billion, a sign that the usual seasonal correction is underway. Officials cautioned against comparing the debt stock as of June 30, 2025, with its position in November, noting that the latter reflects only five months of data.

“A like-for-like comparison should be made with the same July–November period of the previous year,” the Power Division spokesperson said, adding that short-term spikes during early months of the fiscal year are a recurring pattern and do not signal structural deterioration.

The division said circular debt had already fallen significantly in the last fiscal year, declining to Rs1,614 billion by June 2025. That reduction was achieved through improved performance of power distribution companies, stronger macroeconomic conditions and the waiver of late payment interest following negotiations with independent power producers.

Officials said they expect the circular debt position to be fully contained by the end of the current fiscal year, with no net addition to the overall stock, in line with historical trends where seasonal pressures ease in the latter half of the year.

The Power Division also stressed that these fluctuations have no impact on consumer electricity tariffs. It said inefficiencies in distribution companies were cut by Rs193 billion in FY 2024–25 compared with the previous year, with a further Rs49 billion reduction recorded in the first half of FY 2025–26.

The statement also pointed to progress under the Rs1.225 trillion circular debt settlement plan, which spreads refinancing over six years. The first tranche has already been received, officials said, with the remaining stock expected to be eliminated over the coming years alongside the phase-out of the debt service surcharge.