Article · Wikipedia archive · Last revised Jul 31, 2026

Circular debt

In Pakistan, circular debt is a public debt that is a cascade of unpaid government subsidies, which results in the accumulation of debt on distribution companies. When this happens, the distribution companies cannot pay independent power producers, who in turn are unable to pay fuel-providing companies, thus creating the debt effect as seen in the country.

Last revised
Jul 31, 2026
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Wikipedia ↗

In Pakistan, circular debt is a public debt that is a cascade of unpaid government subsidies,1 which results in the accumulation of debt on distribution companies. When this happens, the distribution companies cannot pay independent power producers, who in turn are unable to pay fuel-providing companies, thus creating the debt effect as seen in the country.2

Circular debt started accumulating in Pakistan from 2006. While successive governments have attempted to reduce it burdens via a series of regular payments, they have been unable to control the inflow of new debt.3

As of July 2024, the total circular debt of Pakistan was Rs. 5,730 billion.4 As of 30 June 2025, it stood at Rs. 1.6 trillion.5

References

References

  1. Tauhidi, Amna; Chohan, Usman W. (2020-01-29). "The Conundrum of Circular Debt". CASS Working Papers on Economics & National Affairs. doi:10.2139/ssrn.3513225. SSRN 3513225.
  2. Hashim, Asad. "Lights out: 'Circular debt' cripples Pakistan's power sector". Al Jazeera. Retrieved 2025-09-24.
  3. Kiani, Khaleeq (2025-09-06). "Weak reforms fuel Pakistan's energy black hole". Dawn. Retrieved 2025-09-24.
  4. Rana, Shahbaz (2024-01-16). "Circular debt reaches Rs5.73tr". The Express Tribune. Retrieved 2025-09-24.
  5. Ghumman, Mushtaq (2025-07-31). "Power sector's circular debt hits Rs1.6trn mark: CPPA-G". Business Recorder. Retrieved 2025-09-24.