Energy Circular Debt Hits Rs5.286 Trillion: PSO, HUBC Stocks in Focus

What Pakistan's Rs5.286 Trillion Circular Debt Figure Changed

Pakistan's energy sector circular debt has climbed to Rs5.286 trillion, according to the latest official figures. Unlike an earlier update this year that covered only the power sector's payables, which stood at Rs1.67 trillion for FY26, this newer figure covers the combined shortfall across both electricity and gas, the unpaid and delayed bills that build up between generators, distributors, gas utilities and fuel suppliers when government revenue does not cover the true cost of supply. A bigger combined number means the cash squeeze on companies waiting to be paid has not eased, and if anything has broadened beyond the power sector alone.

Why Energy Stocks Like PSO and HUBC Are in Focus

Circular debt is not an abstract fiscal statistic for the companies caught in it. It shows up directly as receivables on their balance sheets, cash they are owed but have not collected, which squeezes working capital and can delay their own payments to suppliers and lenders in turn. The bigger the pile, the longer companies typically have to wait, and the more they may need to borrow to bridge the gap, adding finance costs that eat into profit even when the underlying business is otherwise running normally.

Which stocks, and why

Pakistan State Oil sits at the centre of the fuel supply side of this problem, since it fronts imported fuel costs for the power sector and carries some of the largest receivables in the entire chain. Hub Power and Kot Addu Power are independent power producers paid largely on a capacity basis, so growing arrears translate directly into delayed cash collection even when their plants are running normally. Sui Northern Gas Pipelines and Sui Southern Gas Company are the two regulated gas utilities most exposed to the gas side of the shortfall, since unpaid bills from power plants and industrial consumers feed into their own recovery and revenue shortfalls even though OGRA tariff determinations are meant to keep their allowed returns broadly intact.

What to watch

Watch for the government's next circular debt reduction plan, including any fresh cash injection, debt to equity conversion, or IPP restructuring, since previous rounds of settlement have periodically eased the burden on these names before it built back up again. Quarterly receivable disclosures from PSO, HUBC and the gas utilities will show whether the pace of delay is stabilising or still worsening, and any further tariff or subsidy adjustment on electricity or gas would be the next policy move to track.