Pakistan's combined energy sector circular debt climbed to Rs 5.286 trillion (Pakistani rupee) by the end of June 2026, up from Rs 5.206 trillion earlier in the year, according to a report published in The Nation citing official sources. The figure underscores the deepening fiscal stress gripping the country's power and gas supply chains.

Gas Sector Bears the Larger Burden

Circular debt in the gas sector rose to Rs 3.611 trillion by June 2026, compared with Rs 3.442 trillion at the start of calendar year 2026. Of this, Rs 1.839 trillion represents the principal amount, with the remainder comprising late payment surcharges, according to the official source cited in the report.

Power Sector Debt Below IMF Estimates

The power sector's circular debt stood at Rs 1.675 trillion as of June 2026 — notably lower than the Rs 1.764 trillion projected by the International Monetary Fund (IMF) in its third review under the Extended Fund Facility (EFF) and second review under the Resilience and Sustainability Facility (RSF). The IMF had also estimated gas sector circular debt at Rs 3.442 trillion in early 2026, a figure that has since been exceeded. The divergence between IMF projections and the latest official data suggests the pace of debt accumulation in the gas sector has outrun earlier forecasts.

Federal Debt Surges 75% in Four Years

Separately, data from the State Bank of Pakistan (SBP) shows the federal government's debt — excluding IMF borrowings and certain other liabilities held on the central bank's balance sheet — reached Rs 83.6 trillion by the end of June 2026. This marks a rise of Rs 35.8 trillion, or roughly 75 per cent, compared with June 2022. The surge reflects Pakistan's sustained reliance on borrowing to bridge fiscal gaps even as it navigates conditions tied to the IMF programme.

Why Circular Debt Persists

Circular debt — the accumulated payment obligations that cascade across power generation, transmission, distribution, and gas supply chains — has been a structural fault line in Pakistan's energy economy for over a decade. Subsidised tariffs, high transmission losses, and delayed government payments to utilities have historically prevented the system from clearing its dues. This is not the first time the figure has crossed the Rs 5 trillion mark; the trajectory suggests that without structural tariff reform and improved recovery rates, the debt stock will continue to expand. Analysts have repeatedly flagged circular debt as a key risk to Pakistan's broader fiscal consolidation effort under the IMF programme.

What Comes Next

With the IMF's ongoing reviews closely monitoring energy sector liabilities, Pakistan's government faces pressure to demonstrate credible reduction in circular debt as a condition for continued programme support. Any slippage in energy sector reforms could complicate disbursements under both the EFF and RSF facilities. Observers will watch the next quarterly SBP data release and IMF review commentary for signals on whether corrective measures are gaining traction.