According to details presented by the Power and Petroleum Divisions in the National Assembly on Monday, Pakistan's power sector circular debt increased by Rs34 billion to Rs1,675 billion by June 30, 2026. During the same period, liabilities in the gas sector surged by Rs344 billion to Rs3,631 billion, highlighting the deepening financial crisis within the country's energy infrastructure.
During the question hour, the Power Division informed the House that the power sector's circular debt stood at Rs1,641 billion at the end of the 2024-25 financial year, rising to Rs1,675 billion by June 30, 2026. The division attributed this increase primarily to the non-payment for electricity supplied from the national grid to K-Electric.
Officials noted that a case regarding the recovery of outstanding dues from K-Electric is currently sub judice. To mitigate the impact of circular debt, the government has introduced a hybrid take-and-pay model by terminating take-or-pay agreements with Independent Power Producers (IPPs).
Other strategic measures include the waiver of late payment interest, a reduction in late payment interest rates for future contracts, and capping rupee devaluation and annual inflation for tariff indexation. These steps are intended to stabilize the sector's long-term financial health.
As part of the circular debt management plan, a low-cost financing facility of Rs1,225 billion was secured from commercial banks at KIBOR minus 0.9pc for a period of six years. This capital was utilized to repay high-cost loans amounting to Rs659 billion and to settle overdue payables owed to various IPPs.
The Petroleum Division provided a grim update on the gas sector, reporting that circular debt rose from Rs3,288 billion on June 30, 2025, to Rs3,631 billion on June 30, 2026. This figure includes a staggering Rs1,783 billion in late payment surcharges, which continue to accumulate.
The government emphasized that structural reforms are necessary to prevent further accumulation of these liabilities. The Ministry of Finance is working closely with the energy divisions to ensure that the fiscal deficit remains within manageable limits despite these mounting pressures.
Furthermore, the Ministry of Foreign Affairs provided an update on the status of Pakistani citizens abroad. They informed the National Assembly that 21,647 Pakistanis are currently imprisoned in 71 countries on various charges, including drug trafficking, human smuggling, and forgery.
The House expressed concern over the plight of these prisoners and the economic burden of the energy sector. Lawmakers urged the government to expedite diplomatic efforts for the repatriation of prisoners and to implement more aggressive reforms in the energy sector to provide relief to the public.
The session concluded with a commitment from the relevant ministries to provide quarterly updates on the progress of debt reduction plans and the status of legal proceedings against defaulting entities.