Pakistan’s energy sector circular debt has reached a new high of Rs. 5.206 trillion, according to the latest International Monetary Fund (IMF) report. This massive debt includes Rs. 3.442 trillion from the gas sector and Rs. 1.764 trillion from the power sector.
The circular debt continues to grow despite several government attempts to control it through tariff increases and reforms. The IMF noted that the energy sector is still under severe financial stress due to high production costs, low cost recovery, and unpaid bills.
The government has assured the IMF that it will continue implementing reforms. These include regular tariff adjustments, reducing untargeted subsidies, improving bill recovery, and better cost management in both power and gas sectors. The authorities also plan to convert some old liabilities into Central Power Purchasing Agency (CPPA) obligations and impose additional surcharges on consumers.
This rising circular debt puts heavy pressure on the national budget and increases the risk of higher electricity and gas prices for consumers in the future.
Experts believe that without strong structural reforms and better governance in the energy sector, the circular debt will keep growing and create more challenges for Pakistan’s economy. The government is under pressure from the IMF to control this debt as part of its ongoing bailout programme.