Pakistan’s power, gas circular debt surges to Rs5.1 trillion, finance committee warns

Pakistan’s growing economic challenges came under sharp focus during a meeting of the National Assembly’s Standing Committee on Finance, where lawmakers were informed

Pakistan’s growing economic challenges came under sharp focus during a meeting of the National Assembly’s Standing Committee on Finance, where lawmakers were informed that the country’s combined circular debt in the electricity and gas sectors has climbed to an alarming Rs5.1 trillion.

Officials briefing the committee said the circular debt stock has increased significantly from Rs3.5 trillion recorded last year, highlighting persistent structural weaknesses in the energy sector and mounting financial pressures on the national economy.

The committee met to assess the country’s overall economic condition and review fiscal priorities ahead of the federal budget for the fiscal year 2026-27. Discussions centered on key economic risks, the implementation status of the International Monetary Fund (IMF) programme, and the urgent need for long-term economic reforms.

During the briefing, members were informed that Pakistan’s total external debt currently stands at $137.56 billion, reflecting the country’s continued dependence on foreign borrowing amid rising financing needs and economic instability.

Economic managers told lawmakers that although certain indicators point towards gradual recovery, the economy remains in what officials described as a state of “unstable stability.” They projected the country’s GDP growth for the upcoming fiscal year to remain between 3.5 percent and 4.5 percent, provided fiscal discipline and reform measures continue.

However, concerns were raised over renewed inflationary pressure. The committee was informed that inflation has once again entered double digits, with the annual inflation rate reaching 10.9 percent in April 2026. Rising prices of essential commodities, fuel, and utilities continue to squeeze household incomes and weaken purchasing power across the country.

Members of the finance committee voiced serious concern over the government’s continued reliance on indirect taxation and petroleum levies to generate revenue instead of broadening the tax net. Several lawmakers argued that excessive dependence on taxes imposed on fuel and consumption disproportionately affects the common citizen and contributes to inflationary trends.

The committee chairman also expressed concern over the growing burden of circular debt, warning that delays in reforms within state-owned enterprises and the energy sector could further destabilize the economy. He emphasized the need for stronger institutional reforms, improved governance, and stricter financial management.

Lawmakers further highlighted the rising challenges of unemployment, poverty, and increasing socio-economic pressures facing the public. They stressed that sustainable economic recovery would require not only fiscal stability but also measures aimed at improving living standards and creating employment opportunities.

The committee is expected to continue consultations on budget proposals and economic reforms in the coming weeks as the government prepares to present the federal budget for 2026-27.