Pakistan’s primary maritime energy corridors are currently affected by the regional conflict. The Strait of Hormuz has been blocked since the Iran-USA conflict escalated, and Qatar Energy declared force majeure in March 2026. Pakistan has since acquired at least seven spot LNG cargoes, the most recent at $21.88 per MMBtu, at a price roughly double the long-term price—PSO’s Liquidity Crunch: When Circular Debt Meets Geopolitical Risk, PRIME, July 28, 2026

Every few years Pakistan State Oil (PSO) returns to the headlines with the same story: mounting receivables, shrinking liquidity, delayed payments to suppliers and fears of disruption in fuel supplies. Governments respond with emergency financing, banks extend temporary credit, the Ministry of Finance arranges another bailout and the immediate crisis recedes—until it returns with greater intensity. 

The recent analysis by Policy Research Institute of Market Economy (PRIME) correctly identifies the growing liquidity stress confronting PSO. The analysis highlights how circular debt has once again constrained the company’s financial capacity at precisely the time Pakistan requires greater investment in energy security and environmental transition. 

The immediate numbers are worrying, but the more important question is why the same crisis keeps recurring despite repeated interventions. That question cannot be answered through accounting alone. It requires a constitutional political economy perspective. Liquidity is never the disease. It is merely the symptom. Pakistan’s energy sector operates under a fragmented institutional design where commercial entities are expected to pursue commercial objectives while simultaneously implementing political decisions. 

PSO purchases petroleum products on commercial terms, but many downstream entities either delay payments or are themselves dependent upon government decisions regarding tariffs, subsidies and recoveries. The result is predictable: cash-flow disruptions travel through the entire energy chain.

The conventional explanation attributes circular debt to delayed recoveries, electricity theft, transmission losses and untargeted subsidies. These factors undoubtedly matter. They explain how liabilities accumulate. They do not explain why institutional arrangements consistently reproduce the same incentives decade after decade.

The deeper problem lies in the absence of........

© The Friday Times