After a Year of Reform Rhetoric: Is Circular Debt Flow Actually Slowing?

The IMF Executive Board completed the second review of Pakistan's Extended Fund Facility on 8 December 2025. The staff report behind that decision, completed on 20 November, contains the clearest official picture yet of what a year of energy reform has done to circular debt, and it is better on power than most domestic commentary allows and worse on gas. According to the staff report, power-sector circular debt fell by PRs 779 billion during FY2025, to PRs 1,614 billion at end-June, or 1.4 per cent of GDP.

The programme sets indicative targets of PRs 400 billion for power circular-debt flow at end-March and end-June 2026, and assumes stock clearance subsidies of the same size so that net accumulation is zero. Our reading is that FY2025's power result was real but partly lucky, and the year-end briefings should say so.