The Ministry of Energy has rejected media reports claiming that power sector circular debt increased by Rs 223 billion during the first five months of the current fiscal year.

In a rebuttal issued on January 26, the Power Division said the figures were misleading and based on incorrect comparisons using outdated data.

The ministry said comparing circular debt as of June 30, 2025, with November 2025 was flawed, as the latter covered only a five-month period rather than a like-for-like timeframe.

Officials clarified that linking debt variations to the bank refinancing agreement signed in September 2025 was inaccurate, as the plan replaces expensive loans with cheaper financing over five to six years.

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Seasonal factors, the ministry added, largely drive circular debt movements between July and November, which typically reverse by the end of the fiscal year, making short-term fluctuations misleading.

Circular debt flow declined in December 2025, bringing the net increase for July to December to less than Rs 80 billion, considerably lower than reported in parts of the media.

The ministry highlighted that circular debt had already declined to Rs 1.614 trillion by June 2025, achieved through improved distribution performance, better macroeconomic conditions, and interest waivers on late payments.

Officials said the government expects the circular debt position to be fully contained by the fiscal year-end, while seasonal changes do not affect consumer electricity tariffs or end-user pricing.