The Power Division said on Tuesday that the increase of 709% in Gross Circular Debt (CD) Flow in FY 2025-26 compared to last year needs to be assessed in the context of macroeconomic conditions, one time LPI waivers, K-Electric payment shortfall and prior-year adjustments.

A Spokesperson of the Power Division while commenting on the report published by The Express Tribune, said that the Gross CD Flow during FY 2025-26 was Rs364 billion against the prescribed target of Rs400 billion, remaining Rs36 billion below the target.

The spokesperson added that the Net CD Flow target was zero, while the Circular Debt Stock target could not be fully achieved. “The deviation was primarily driven by significant payment shortfalls by K-Electric and lower-than-planned subsidy releases, which constrained sectoral cash flows and resulted in an increase of approximately Rs61 billion in the Circular Debt Stock.”

The spokesperson said that the increase in Circular Debt should be viewed primarily against the backdrop of K-Electric’s outstanding payment obligations. The K-Electric’s payment shortfall was a major contributor to the increase, accounting for approximately Rs194 billion of Circular Debt Flow during FY 2025-26,” it added.

“This was fundamentally a payment and cash-flow issue rather than a deterioration in DISCO operational performance,” the Power Division stated. At the same time, the government has made substantial progress in containing the accumulated Circular Debt, the spokesperson continued.

As of 30 June 2026, according to the spokesperson, the Circular Debt Stock stood at Rs1,675 billion, compared with Rs2,393 billion at the end of FY 2023-24, showing a fall of Rs718 billion over two years. “This reflects a significant improvement in the management of the sector’s accumulated financial liabilities,” it said.