ISLAMABAD: Pakistan's combined gas sector circular debt and outstanding payables to suppliers reached Rs5.454 trillion ($19.5 billion) as of June 30, 2026, Energy Minister Ali Pervaiz Malik told the National Assembly, underscoring the deepening financial strain on the country's energy chain.
Malik said in written replies during Monday's Question Hour that the gas sector's circular debt alone stood at Rs3.631 trillion, while outstanding payables to indigenous gas and liquefied natural gas suppliers amounted to Rs1.823 trillion. The circular debt figure includes Rs1.448 trillion in tariff differentials, Rs131 billion owed by power companies, Rs210 billion in sales and income tax receivables, and Rs59 billion tied to litigation. Of the total, principal amounted to Rs1.848 trillion, with late payment surcharges accounting for Rs1.783 trillion.
Payables to indigenous gas producers reached Rs1.479 trillion, while obligations to LNG suppliers — including re-gasified LNG price actualisation and diversion costs — totaled Rs344 billion. The minister said the Circular Debt Management Plan is being finalized with stakeholders and will be submitted to the competent forum before being shared with the International Monetary Fund under the ongoing reform framework.
The Core Problem
Pakistan's circular debt is a chain of unpaid liabilities that runs from consumers through distribution companies to generators and fuel suppliers. The root cause is a persistent gap between the cost of supplying energy and the revenue recovered from consumers, driven by delayed tariff adjustments, operational inefficiencies at distribution companies, weak bill recovery, and government subsidies that are billed but not fully paid.
When tariffs do not reflect the actual cost of generation, transmission and distribution, the shortfall accumulates across the supply chain. The IMF has repeatedly urged Pakistan to implement timely electricity and gas tariff adjustments to prevent fresh accumulation, warning that delays increase the gap between supply costs and recoveries. Distribution company inefficiencies alone added Rs262 billion to power sector circular debt in fiscal year 2026, more than four times the Rs64 billion contributed by weak bill recoveries.
Impact on Energy Prices
The circular debt directly feeds into consumer tariffs. Because the government must borrow to finance the unpaid obligations, interest costs compound the stock. Late payment surcharges on the gas sector alone reached Rs1.783 trillion, meaning nearly half of the gas circular debt is now accrued interest rather than principal. When the government raises tariffs to close the cost-recovery gap, consumers bear the burden; when it delays, the debt grows and future adjustments become larger.
The IMF has linked continued disbursements under Pakistan's bailout program to progress on reducing circular debt flows, making tariff discipline a condition of external financing. The government has committed to bringing the power sector circular debt stock down, though targets have repeatedly been missed due to non-payment by K-Electric and weaker-than-expected recoveries.
Reserves and Other Matters
Malik also told the House that Pakistan's total recoverable oil reserves stood at 1,378 million barrels, of which 1,102 million barrels have been produced, leaving 276 million barrels. Recoverable gas reserves total 68,803 billion cubic feet, with 48,140 billion cubic feet produced and 20,664 billion cubic feet remaining.
In a separate written reply, Foreign Minister Senator Mohammad Ishaq Dar said 21,647 Pakistani nationals are imprisoned in various countries — 13,078 facing trial and 8,569 convicted. The largest cohort is in the United Arab Emirates with 5,297 prisoners, followed by India with 738, Qatar with 599, and Oman with 578. In China, 417 Pakistanis are facing trial and 235 have been convicted; in the United States, 84 are awaiting trial and 57 convicted.
