Islamabad: A major breakthrough has been achieved in efforts to resolve Pakistan’s mounting power sector circular debt, as the federal government finalized a financing agreement worth Rs 1.275 trillion with commercial banks. According to official sources, the signing ceremony for the financing facility is scheduled to be held today at the Prime Minister’s Office, where Prime Minister Shehbaz Sharif will participate via video link.
The federal cabinet had already granted approval for borrowing Rs 1.275 trillion from commercial banks at a lower interest rate to ease the financial burden. The agreement is seen as a critical measure to stabilize the sector and curb the swelling debt.
Today’s ceremony will be attended by representatives of 18 commercial banks, heads of distribution companies (DISCOs), Chairman of the National Electric Power Regulatory Authority (NEPRA), and the Governor of the State Bank of Pakistan. International stakeholders including the IMF Mission Chief, the World Bank Country Director, and the Asian Development Bank (ADB) Country Director have also been invited, underscoring the importance of the initiative.
The circular debt in Pakistan’s power sector stood at Rs 1.614 trillion by June 2025 and climbed further to Rs 1.661 trillion in July 2025. In response to this alarming surge, the federal cabinet in June approved a comprehensive strategy to eliminate the circular debt stock. Implementation of that strategy is now in progress, with today’s financing arrangement marking a milestone in the government’s roadmap to restore financial discipline in the energy sector and regain confidence from lenders and development partners.