Pakistan’s gas sector circular debt has surged to an alarming Rs32 trillion, reflecting mounting financial pressures on energy companies and government finances, according to a statement issued by the Ministry of Finance on Friday. The sharp rise in accrued liabilities underscores ongoing structural weaknesses within the country’s energy sector.
Circular debt, the gap between the cost of supplying gas and the revenue collected from consumers, has expanded as subsidies, inefficiencies, and delayed payments have continued without meaningful reform. The government noted that this growing debt threatens not only the financial health of gas utilities but also broader economic stability.
According to the finance ministry, the latest figure of Rs32 trillion represents accumulated outstanding payments owed by gas distribution companies to suppliers, including state-owned entities and international partners. Energy sector analysts said this debt buildup has been exacerbated by persistent under-pricing of gas for domestic and industrial consumers, as well as slow tariff rationalisation.
Officials highlighted that failure to address the debt could lead to disruptions in gas supply and reduced capacity for future investment. Gas remains a critical source of energy for Pakistan’s households, industries, and power plants, making the management of related finances a priority for policymakers.
The government has repeatedly acknowledged the need for structural reform in the gas and power sectors, which have long struggled with financial losses due to inefficiencies, leakages, and subsidised pricing. Previous attempts at tariff increases have faced public pushback and political challenges, complicating efforts to bridge the revenue shortfall.
Experts say the escalation of circular debt imposes a heavy burden on public finances and can crowd out funding for development projects. It also increases reliance on borrowing, particularly from domestic banks and international lenders, raising concerns about debt sustainability.
The finance ministry has urged swift policy measures to stem the growth of circular debt, including improved billing systems, reduction of transmission losses, and transparent tariff adjustments that align with actual market costs. Without decisive action, authorities warn, the energy sector’s fiscal deficit could continue to widen.
The Rs32 trillion figure comes as Pakistan prepares for broader economic negotiations with international financial institutions. Observers believe that energy sector reform — including tackling circular debt, will be a central theme in discussions with the International Monetary Fund (IMF) and other stakeholders over the coming months.
Government officials said additional details on strategies to control the debt will be shared soon, as part of the upcoming economic policy review. A senior official, speaking on condition of anonymity, said “substantial reforms are overdue and will be necessary to stabilise the energy sector’s finances.”
Citizens and businesses, meanwhile, have expressed concern over rising costs and the potential for increased tariffs, which could squeeze household budgets and industrial competitiveness if passed through to consumers.
The latest escalation in circular debt highlights the continuing challenges Pakistan faces in balancing energy affordability with financial sustainability, a complex policy dilemma confronting governments for years.