In a significant achievement for Pakistan’s energy economy, the federal government, in collaboration with the Special Investment Facilitation Council (SIFC), has successfully reduced the country’s power sector circular debt by Rs800 billion within a year, according to a report by 24NewsHD TV.

As per official data, the circular debt — a long-standing challenge for Pakistan’s power industry — stood at Rs2,500 billion in September 2024. By September 2025, the figure had dropped to Rs1,700 billion, representing a 31.4 percent reduction in just 12 months. This marks one of the most substantial year-over-year improvements in the sector’s financial performance in recent years.

The reduction is attributed to the targeted reforms and financial discipline implemented under the guidance of the SIFC and the Ministry of Energy. These measures include tighter monitoring of power distribution companies (DISCOs), improved billing recovery, fuel supply optimization, and the streamlining of government payments to independent power producers (IPPs).

According to the report, power distribution companies’ outstanding dues stood at Rs944 billion in September 2025, while independent power producers (IPPs) were owed Rs908 billion as of July 2025. Additionally, the government allocated Rs660 billion for the Power Holding Company to address payment backlogs and liquidity challenges in the sector.

The government also cleared Rs93 billion in liabilities related to fuel supply costs for power generation firms. Despite a Rs77 billion increase in the circular debt during the previous fiscal year, the net reduction over the last 12 months demonstrates that the corrective actions taken since mid-2024 have started to yield results.

Officials attributed past increases in circular debt primarily to inefficiencies and poor recovery performance by certain DISCOs. These issues had long plagued Pakistan’s energy supply chain, resulting in payment delays, load management challenges, and financial instability across the sector.

With the circular debt now trending downward, the government expects further stabilization in the energy sector, improved investor confidence, and reduced reliance on subsidies. Officials emphasized that continued performance audits of DISCOs, coupled with digitalization of billing systems and energy market reforms, will be key to sustaining the progress.

The reduction in circular debt is being viewed as a major milestone under the SIFC’s national economic revival plan, which focuses on enhancing efficiency, fiscal management, and investment confidence in Pakistan’s key sectors. Analysts note that such progress is critical not only for energy security but also for economic stability, as circular debt has historically strained public finances and discouraged foreign investment in Pakistan’s power infrastructure.