ISLAMABAD: With limited progress on reforms and over Rs4.6 trillion in accumulated liabilities, Pakistan’s energy sector continues to strain the economy, weighed down by weak collections, theft, poor infrastructure, governance failures and market inefficiencies.

According to a detailed report by the Washington-based Institute of Inte­rnational Finance (IIF), “taken together, there is about 4pc of GDP worth of debt stemming from the energy sector. The repercussions reverberate throughout the economy, not only impacting the fiscal but also growth, inflation, the external balance and the financial sector.”

Circular debt has plagued the country since 2006. While successive governments have made periodic payments to ease the pressure — including a recent Rs800bn settlement — the flow of new debt remains unchecked. As of June 2025, the stock of circular debt stood at Rs1.6tr (1.4pc of GDP), compounded by another Rs3tr (2.6pc of GDP) owed by power producers to the oil and gas sector.

The report said the debt has severe fiscal consequences. To contain high servicing costs, the government created Power Holding Limited (PHL), a special purpose........

© Dawn Business