Page 30 - CMA Journal (Sep-Oct 2025)

Tariff Reforms to Break
Focus Section

the Debt Cycle

Author: Co-Author

Afia Malik Furqan Ali
Researcher and Researcher &
Energy expert Advisory Associate
at Zahid Jamil & Co.

Pakistan's power sector, despite its inordinate installed created inefficiencies in tariffs, governance, and market
capacity and multifarious reform attempts, continues to design. This collective burden, caused by the
bleed both financially and in meeting its obligations wrongdoings of a few, continues to grip the
towards investors and consumers. macroeconomy, already caught in a boom-bust cycle.
The sector's chronic ailment, circular debt (CD), has The manufacturing sector's weakness is evident in trade
metamorphosed into a structural crisis, rising from Rs. 0.1 data, with stagnant exports since FY22 and a trade deficit
trillion in FY2006 to Rs. 2.5 trillion as of May 2025 (Chart of USD 3.3 billion in September 2025, the highest since
1), equivalent to roughly 2.3% of GDP. This, mind you, is in August 2022. Imports also rose to USD 5.8 billion, the
a country already trapped in a debt spiral, with a 70.2% highest during that period (BR Research, 2025). A 10%
debt-to-GDP ratio (Ali & Ijaz, 2025). increase in consumer demand is estimated to result in a
welfare loss of about USD 13 billion (Malik & Mustafa, 2024).
CD reflects more profound distortions rooted in the
citadel of political economy; distortions that have

Chart 1. Circular Debt- Power Sector (PKR Billion)

Gross payable Amount Swapped (PHPL)

683
683
765
930 800
1004
785
660 660
578
216 1710 1787
432 1545
1350 1453
216 1043 1146
872 335 335 828 954 1001
105 538 239 239 560
105 105 366 211 250 314 321
111 145 161 236
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 May-25 Jun-25 Jul-25

Source: Malik (2020), NEPRA and Power Division Reports
28 ICMA’s Chartered Management Accountant, Sep-Oct 2025