By BR Web Desk

Copyright brecorder

Pakistan’s power sector circular debt stood at Rs1.66 trillion in July 2025, declining sharply by 29.3% from Rs2.35 trillion in July 2024, according to data compiled by Arif Habib Limited (AHL). However, the stock increased marginally by 2.9% month-on-month (MoM).

According to the data, payables to power producers accounted for the largest chunk of the debt, which amounted to Rs908 billion in July, up 5.5% MoM but significantly lower, i.e. 41.8% than Rs1.56 trillion during the same month last year.

Meanwhile, GENCOs’ payables to fuel suppliers remained at Rs93 billion, showing a 13.1% annual drop. Debt parked in the Power Holding Limited (PHL) stood at Rs660 billion, unchanged from June but 3.4% lower on a yearly basis.

The data break-up showed that budgeted but unreleased subsidies contributed Rs35 billion during July, compared to Rs28 billion in June. DISCO losses and inefficiencies added Rs41 billion, while DISCO under-recoveries contributed Rs46 billion. However, this was partly offset by prior year recoveries and other adjustments, which shaved off Rs72 billion.

Meanwhile, pending generation cost adjustments (QTA + FCA) reduced the burden by Rs6 billion in July. Non-payment by K-Electric stood at Rs3 billion.

Overall, the net increase in circular debt during July stood at Rs47 billion.

Days ago, Power Division requested Prime Minister Shehbaz Sharif to witness the signing ceremony of agreements with banks for raising Rs1.225 trillion in loans to partially retire the power sector’s circular debt, which currently stands at about Rs1.7 trillion, down from Rs2.5 trillion, well-informed sources told Business Recorder.

According to sources, all codal formalities for the Rs 1.225 trillion financing package have been completed with 18 banks. The boards of Discos, CPPA-G, Power Division, and Finance Division have already cleared the agreements.

“All codal requirements, requisite documents, and guarantees are now in place,” a source confirmed.