The specter of circular debt that has been haunting Pakistan’s power sector for a long time, seems to be partly stabilized with a total stock standing at Rs 1.614 trillion as of June 2025 (Ministry of Energy, 2025). It represents a significant cut over last year (2022–23), which was Rs 2.393 trillion from prior FY, a decline of Rs 780 billion.

Over the first 16 months of the incumbent government (March 2024–June 2025), the debt was brought down from Rs 2.679 trillion to Rs 1.614 trillion — a drop of about Rs 1.065 trillion (Ministry of Finance, 2025). This unanticipated advancement is firstly the result of the breakthrough deal made by the Government of Pakistan with 18 leading commercial banks for Rs 1.275 trillion Islamic financing.

The government is now expected to repay this facility in 24 quarterly instalments over six years, at a rate linked to the three-month KIBOR minus 0.9 percent (Pakistan Banks Association, PBA).

The payments would retire Rs 683 billion payable to Power Holding Limited (PHL) and clear arrears of Rs 569........

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