Pakistan Resists IMF Pressure to Limit Circular Debt at Rs. 200 Billion
October 8, 2025 | 7:18 AM
Islamabad: Pakistan has informed the International Monetary Fund (IMF) that losses in the power sector could surge to Rs. 535 billion during the current fiscal year — a 35% increase from last year — as inefficiencies and weak bill recoveries continue to add to the country’s persistent circular debt challenge.
According to a report by The Express Tribune, the Power Division told the IMF that circular debt could rise by Rs. 505 billion this year, significantly higher than the Rs. 200 billion ceiling proposed by the global lender.
The projected increase is mainly due to two factors:
-
Inefficiencies in power companies, adding around Rs. 276 billion to total losses.
-
Under-recovery of electricity bills, expected to reach Rs. 260 billion, nearly double last year’s figure.
Officials attributed the sharp rise in unpaid bills to the impact of floods and other external factors that disrupted recovery operations.
Despite ongoing reforms and efforts by both civilian and military leadership — including talks with independent power producers (IPPs) — Pakistan continues to face deep-rooted structural issues in its energy sector.
Currently, the country’s circular debt stands at Rs. 1.6 trillion, down from Rs. 2.42 trillion last year, mainly due to temporary fiscal measures.
The IMF has asked Pakistani authorities to clarify why early improvements seen in July and August, when sector losses dropped 37% year-on-year to Rs. 153 billion, could not be maintained throughout the year. Officials responded that the scope for further improvement is limited, especially after the floods in Punjab, and that long-term solutions require major structural reforms in the power sector.
