Circular debt

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]