Think Tank Report Questions Government Claims as Power Sector Circular Debt Surges
KARACHI: A report released by the Economic Policy and Business Development Think Tank has challenged the government’s claims regarding a reduction in Pakistan’s power sector circular debt, stating that the debt has continued to rise despite refinancing measures.
According to the report, newly accumulated circular debt increased from Rs18 billion to Rs240 billion during the first 10 months of the 2025–26 fiscal year.
The report argues that the government’s refinancing and debt recycling initiatives have not reduced the actual debt burden but have merely restructured or shifted it.
While government institutions have reported a 23 percent decline in the overall stock of circular debt, the think tank noted that the volume of newly created circular debt rose sharply during the same period.
The report identified expensive power purchase agreements (PPAs), high capacity payments, and the financial inefficiencies of electricity distribution companies as the primary drivers of the power sector’s growing losses.
It further stated that financial adjustments have only temporarily masked the circular debt problem rather than addressing its underlying structural causes.
The report presents the think tank’s analysis, and the government had not immediately responded to its findings.
