Core Problems

• Circular debt — cascading unpaid bills/subsidies across generation-distribution chain; crossed PKR 2.5+ trillion in recent years
• Generation-transmission mismatch — installed capacity often exceeds actual usable/transmittable power (capacity payments to IPPs paid regardless of usage — major fiscal burden)
• High cost of generation — heavy reliance on imported fuel (LNG, furnace oil) historically; expensive IPP contracts (some dollar-indexed)
• Transmission & distribution losses — technical + theft/non-payment losses ("line losses") remain high, especially in certain DISCOs
• Gas depletion — domestic gas reserves declining, rising import dependency (LNG)

Causes

• Poor energy sector governance & planning (over-contracting IPP capacity in 2015-18 era)
• Underpricing/subsidies without matching fiscal capacity
• Currency depreciation raising cost of imported fuel & dollar-indexed IPP payments
• Weak collection/recovery — theft, non-payment, especially in some regions

Effects

• High electricity/gas tariffs — burden on households & industry, hurting export competitiveness
• Frequent load-shedding historically — dents industrial productivity, foreign investment appeal
• Fiscal burden — energy subsidies/circular debt strain national budget, complicate IMF program compliance
• Social/political unrest over rising utility bills (recurring protests)

Policy Responses

• Push toward renewable energy (solar, wind, hydel) to reduce import dependency
• IMF-linked reforms: tariff rationalization, DISCO privatization discussions
• CPEC energy projects (added significant generation capacity, but contributed to capacity payment burden)