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ISLAMABAD, Jan 26 (APP):The Ministry of Energy (Power Division) on Monday rejected media reports claiming that Circular Debt (CD) flow increased by Rs224 billion during the period from July to November 2025, despite the bank refinancing agreement signed in September 2025, terming the figures misleading, factually incorrect and based on incomplete data.
Responding to a news item published in a section of the media, the Power Division spokesperson said the report failed to present up-to-date data, lacked proper factual linkage and was published without seeking the official version of the Power Division.
The spokesperson clarified that it is imperative to note that the Circular Debt Stock on June 30th 2025 can not be compared with its stock at the end of November 2025 that is only three months. Furthermore the story totally on a wrong footing attributed and connected the Circular Debt variation with Banks Agreement which was primarily meant for PHPL expensive debt replacement with much cheaper loan and that too with a five to six years plan to repay the loan itself.
Ideally, the spokesperson said, the period from July to November 2025 period could have been compared with July to November 2024. It has created misunderstanding. It is important to highlight that the said July to November 2024 increase is primarily attributable to seasonal factors that influence monthly Circular Debt movements and are typically reversed by the end of the fiscal year.
It is very important to note that the circular debt flow declined in December 25, resulting in a net circular debt flow of less than Rs 80 billion for the period from July to December 2025, he added.
The spokesperson also pointed out that the same news report acknowledged a significant reduction in circular debt during FY 2024-25, which stood at Rs1,614 billion as of June 2025. He said this reduction was achieved through improved operational efficiency of power distribution companies (DISCOs), strengthening of macroeconomic variables and waiver of late payment interest following successful negotiations with Independent Power Producers (IPPs).
It is expected that by the close of the current fiscal year, the Circular Debt position will be fully contained, with no net addition to the overall stock. This expectation is consistent with historical trends, wherein seasonal fluctuations typically normalize in the latter part of the fiscal year.
The spokesperson emphasized that these seasonal variations in Circular Debt flow have no implications for consumer-end electricity tariffs and therefore do not impact end-user pricing.
It is also pertinent to highlight that DISCOs’ inefficiencies during FY 2024-25, as compared to FY 2023-24, were reduced by Rs 193 billion. Similarly, inefficiencies during Jul-Dec 25 further declined by Rs. 49 billion compared to the corresponding period of Jul-Dec 24.
These improvements, he said, reflected the government’s continued commitment to enhancing operational efficiency and maintaining financial discipline in the power sector.
Additionally, it is pertinent to mention that the Rs. 1,225 billion Circular Debt Settlement Plan is to be implemented over a six-year period wherein existing CD stock shall be refinanced at favourable terms. Till date the first tranche of the settlement has been received. The stock shall be eliminated in next six years along with discontinuation of Debt Service Surcharge.