Circular debt

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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]

References

  1. ↑ Tauhidi, Amna; Chohan, Usman W. (2020-01-29). "The Conundrum of Circular Debt". CASS Working Papers on Economics & National Affairs. doi:10.2139/ssrn.3513225. SSRN   3513225.
  2. ↑ Hashim, Asad. "Lights out: 'Circular debt' cripples Pakistan's power sector". Al Jazeera . Retrieved 2025-09-24.
  3. ↑ Kiani, Khaleeq (2025-09-06). "Weak reforms fuel Pakistan's energy black hole". Dawn . Retrieved 2025-09-24.
  4. ↑ Rana, Shahbaz (2024-01-16). "Circular debt reaches Rs5.73tr". The Express Tribune . Retrieved 2025-09-24.
  5. ↑ Ghumman, Mushtaq (2025-07-31). "Power sector's circular debt hits Rs1.6trn mark: CPPA-G". Business Recorder . Retrieved 2025-09-24.


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