Pakistan’s energy sector continues to face mounting financial pressure as combined circular debt in the electricity and gas sectors reached Rs5.306 trillion by June 30, 2026, according to figures presented to the National Assembly.
The latest figures show that gas-sector circular debt has reached Rs3.631 trillion, while electricity-sector debt stands at Rs1.675 trillion. The rising liabilities highlight the difficulties in stabilising the country’s energy finances despite government efforts to contain outstanding payments and reduce borrowing costs.
The gas sector recorded a significantly larger increase in liabilities during the financial year 2025-26, adding approximately Rs344 billion. Electricity-sector circular debt increased by Rs34 billion, according to parliamentary figures reported by The News and Profit by Pakistan Today. Source: The News
The growing debt burden also has implications for electricity consumers, who continue to pay a debt-service surcharge of Rs3.23 per unit to help service loans taken to address outstanding power-sector liabilities.
Combined Circular Debt Crosses Rs5.3 Trillion
The combined circular debt of Pakistan’s electricity and gas sectors reached Rs5,306 billion, equivalent to Rs5.306 trillion, by the end of June 2026.
Of this amount, the power sector accounted for Rs1,675 billion, while the gas sector accounted for Rs3,631 billion.
Circular debt develops when payments owed across an energy supply chain remain unsettled. Outstanding bills, delayed payments, financing costs and accumulated surcharges can create a cycle in which companies struggle to meet their own financial obligations.
The latest figures indicate that the problem remains substantial, with gas-sector liabilities accounting for the larger share of the combined total.
The figures also underline the importance of addressing payment delays and the financial arrangements that allow unpaid obligations and surcharges to accumulate over time.
Electricity-Sector Debt Reaches Rs1.675 Trillion
According to information submitted by the Power Division to the National Assembly, electricity-sector circular debt increased from Rs1.641 trillion at the end of fiscal year 2024-25 to Rs1.675 trillion by June 30, 2026.
This represented an increase of Rs34 billion during fiscal year 2025-26.
Officials identified outstanding payments by K-Electric for electricity supplied through the national grid as a major factor behind the increase. The recovery of these dues remains connected to a tariff-related case pending before the court, according to the parliamentary briefing.
The government has also introduced measures intended to reduce financial pressure across the power sector.
These include changes to contractual arrangements with independent power producers (IPPs), including a move away from the traditional take-or-pay framework towards a hybrid take-and-pay model.
Other measures include efforts to reduce late-payment interest costs, secure interest waivers and limit certain tariff adjustments linked to currency depreciation and inflation.
However, the latest figures show that electricity-sector circular debt has not yet been eliminated, and outstanding payments remain a challenge for the government.
Gas-Sector Circular Debt Rises by Rs344 Billion
The gas sector recorded a larger increase in circular debt during the same financial year.
According to the Petroleum Division’s figures presented to the National Assembly, gas-sector circular debt increased from Rs3.288 trillion on June 30, 2025, to Rs3.631 trillion by June 30, 2026.
This represented an increase of approximately Rs344 billion over the year.
The amount includes Rs1.783 trillion in accumulated late-payment surcharges, making financing-related costs a substantial component of the sector’s liabilities.
The late-payment surcharges arise from delayed settlements and add to the overall financial burden associated with outstanding obligations.
The gas-sector figures highlight the scale of the challenge facing authorities as they seek to improve payment arrangements, manage accumulated liabilities and establish more sustainable financing conditions.
The government will need to address the underlying obligations as well as the additional costs associated with delayed payments if it is to prevent further accumulation of debt.
Rs1.783 Trillion in Gas Late-Payment Surcharges
One of the most significant components of the gas-sector debt figure is the Rs1.783 trillion recorded in late-payment surcharges.
These surcharges form a substantial portion of the Rs3.631 trillion in gas-sector circular debt reported for the end of June 2026.
The remaining principal amount was reported at Rs1.848 trillion. The Petroleum Division’s breakdown also included tariff differentials, receivables from power companies, sales and income tax receivables, and amounts associated with litigation.
According to reporting by Business Recorder, the gas-sector circular debt included Rs1.448 trillion in tariff differentials, Rs131 billion in receivables from power companies, Rs210 billion in sales and income tax receivables, and Rs59 billion in litigation-related amounts. Source: Business Recorder
These figures demonstrate that the sector’s financial problems involve several categories of outstanding obligations rather than a single unpaid bill or liability.
The size of the accumulated surcharges also illustrates how delayed payments can increase the overall cost of settling debt.
Electricity Consumers Continue Paying Rs3.23 Per Unit
The circular debt issue also affects electricity consumers through the debt-service surcharge charged on power bills.
The government has continued the Rs3.23-per-unit surcharge to help service loans secured to address outstanding power-sector payments.
In January 2026, the Power Division said the surcharge would continue for up to six years and would be withdrawn once the relevant circular debt was cleared. Source: Dawn
The charge is intended to support repayment of financing associated with the settlement of circular debt. It is distinct from other components of electricity bills, such as the base tariff, fuel cost adjustments and quarterly tariff adjustments.
For consumers, the continued surcharge means that efforts to manage the power sector’s accumulated liabilities remain connected to electricity billing.
The longer-term objective is to reduce the outstanding debt so that the surcharge can eventually be withdrawn, although its continuation depends on progress in resolving the liabilities it is intended to service.
Government Measures Face a Continuing Test
The government has introduced several steps to manage the power sector’s financial position, including refinancing arrangements, contractual changes and efforts to reduce interest costs.
The Power Division also reported securing a Rs1.225 trillion financing facility from commercial banks for a six-year period at a rate linked to KIBOR minus 0.9 percentage points. The facility was used to refinance higher-cost borrowing and settle overdue payments to power producers, subject to agreements involving late-payment interest waivers.
These measures are intended to reduce the cost of outstanding obligations and improve the management of payments across the electricity supply chain.
However, the latest combined circular debt figure of Rs5.306 trillion shows that significant financial challenges remain across both electricity and gas.
The gas sector’s rising liabilities, in particular, highlight the need for reforms that address accumulated surcharges and the causes of delayed settlements.
What the Latest Figures Mean for Pakistan
Pakistan’s energy-sector circular debt remains a major financial concern, with gas-sector liabilities exceeding electricity-sector debt by a substantial margin.
The figures for June 2026 show that the combined burden reached Rs5.306 trillion, while the gas sector alone accumulated approximately Rs344 billion in additional circular debt during fiscal year 2025-26.
The electricity sector also continues to carry significant outstanding liabilities, with the government relying on financing arrangements and policy changes to contain the problem.
For the government, the challenge is to reduce accumulated debt while improving payment discipline and controlling financing costs. For consumers, the continued debt-service surcharge demonstrates how the financial management of the energy sector can affect household and business electricity bills.
The latest figures underline that reforms remain necessary to address outstanding payments, limit the accumulation of surcharges and improve the long-term financial sustainability of Pakistan’s energy sector.
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