Karachi: Pakistan’s circular debt has escalated to a critical level of Rs. 2.5 trillion, marking a significant increase from Rs. 400 billion in 2012, posing severe threats to the nation’s economic stability.

According to Federation of Pakistan Chambers of Commerce and Industry, the issue was highlighted by Syed Mazhar Ali Nasir, a central leader of the United Business Group and former Senior Vice President of FPCCI. He described the circular debt as a debilitating cycle that hampers economic growth and strains the financial framework of the country. The debt primarily results from substantial capacity charge payments to Independent Power Producers (IPPs), which have led to liquidity issues within the power sector and increased tariffs for consumers. Additionally, this has placed a considerable burden on the national treasury, affected the country’s credit rating, and dampened investor confidence.

To combat this growing problem, Nasir advocated for essential reforms in the power sector, including the renegotiation of IPP agreements to lower capacity charges, improvements in power generation efficiency, and the rationalization of consumer tariffs. These steps are crucial for breaking the vicious cycle of circular debt and setting Pakistan on a path toward economic recovery and stability.