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PESHAWAR: The Khyber Pakhtunkhwa government has approved a package of measures aimed at providing tax relief to businesses and industries operating in the province’s merged tribal districts and Malakand Division, while also expanding welfare and education initiatives. According to Khyber Pakhtunkhwa Information Minister Shafiullah Jan, the provincial cabinet has endorsed exemptions from certain provincial taxes for service providers and industries operating in areas previously covered by the Federally Administered Tribal Areas (FATA), Provincially Administered Tribal Areas (PATA) and Malakand Division. Under the decision, service providers operating in the former FATA, PATA and Malakand areas will be exempted from provincial sales tax on services. Industries established in these regions will also receive relief from withholding sales tax. The government said the tax measures were intended to encourage investment, facilitate businesses and support economic activity in areas that have historically faced developmental and infrastructure challenges. Ehsaas Nawaz funding increased The cabinet also approved a significant increase in the financial allocation for the Ehsaas Nawaz programme. According to the information minister, the programme’s funding has been raised from Rs3 billion to Rs5 billion. The increase is expected to provide additional financial support under the government’s welfare initiatives and expand the programme’s reach among deserving segments of the population. Ashra Rahmat Lil-Aalameen programme approved The provincial cabinet also approved arrangements for observing Ashra Rahmat Lil-Aalameen (PBUH) across Khyber Pakhtunkhwa. The celebrations will formally begin from the first day of Rabi-ul-Awwal, with the cabinet approving a schedule for programmes to be organised across the province. The initiative is expected to include a range of activities aimed at highlighting the teachings, life and message of the Holy Prophet Muhammad (PBUH). Education sector measures Several decisions concerning education were also approved during the cabinet meeting. The provincial government sanctioned funds for schools and colleges in various districts to address educational requirements and improve facilities. The cabinet also approved a system for providing textbooks according to the semester system up to Grade 5. In another major education-related decision, the cabinet approved the provision of 100 percent free textbooks for students from Grade 9 to Grade 12. The measures are aimed at reducing the financial burden on students and their families while improving access to educational resources, particularly for students enrolled in government institutions. Public-private partnership legislation The cabinet further approved the Khyber Pakhtunkhwa Public Private Partnership Authority Bill 2026 for enactment. The proposed legislation is intended to establish a formal framework for public-private partnerships in the province and facilitate greater participation of the private sector in development projects. The government believes stronger public-private cooperation can help mobilise investment, improve service delivery and accelerate infrastructure development across Khyber Pakhtunkhwa.

ISLAMABAD: Pakistan’s power sector circular debt increased by Rs364 billion during fiscal year 2025-26, highlighting persistent weaknesses in the electricity supply chain despite substantial government subsidies and efforts to contain the buildup of unpaid liabilities. According to the circular debt report for June 2026, the increase was significantly higher than the previous year, when the debt had risen by around Rs45 billion. The latest increase represents a surge of roughly 709% year-on-year in the annual flow of circular debt. The Power Division has not yet formally uploaded the one-page circular debt report for June 2026 on its official website. The latest figures indicate that structural problems, including distribution company inefficiencies, weak bill recovery, payment disputes and delays in tariff adjustments, continue to generate fresh liabilities in the power sector. The development comes despite the government’s efforts to contain the debt through budgetary support and subsidies. IMF target and government commitments The International Monetary Fund (IMF) had permitted Pakistan to record up to Rs400 billion in circular debt flow during the year, while simultaneously requiring the government to take measures to prevent the accumulation of new liabilities and eventually bring the flow down to zero. Under the IMF programme, the government has been relying on tariff adjustments, subsidy rationalisation and other reforms to improve the financial health of the electricity sector. However, the latest increase suggests that governance and operational problems remain a major obstacle to achieving a sustainable reduction in circular debt. The government provided approximately Rs302 billion in subsidies aimed at supporting the power sector and reducing the debt burden. However, the amount was insufficient to maintain the circular debt stock at the level of Rs1.614 trillion recorded at the end of June 2025. As a result, the debt stock recorded a net increase of around Rs61 billion during the year. The Power Division had earlier stated that the federal government allocated Rs893 billion for the power sector in the FY2025-26 budget. However, around Rs98 billion of the allocated amount was not released, affecting the government’s ability to reduce the outstanding liabilities. A Power Division spokesperson said that if the entire budgeted allocation had been released, the circular debt stock could have fallen further to around Rs1.577 trillion. The funding shortfall, according to the official, contributed to the Rs61 billion increase recorded during the year. Distribution companies remain a major source of losses Inefficiencies within power distribution companies continued to be one of the biggest contributors to the accumulation of circular debt. The government incurred approximately Rs262 billion in losses during FY2025-26 because of inefficiencies in distribution companies. The amount was only around Rs3 billion lower than the previous year, indicating that little progress has been made in addressing operational weaknesses. Another Rs64 billion was added to the circular debt because of lower electricity bill recoveries. Although significant, this amount was around 51% lower than the corresponding figure recorded in the preceding year. The figures underline the financial pressure created by electricity theft, transmission and distribution losses, weak collection systems and inadequate enforcement against non-paying consumers. Privatisation of distribution companies The government has initiated the process of privatising three relatively profitable distribution companies — Faisalabad Electric Supply Company, Gujranwala Electric Power Company and Islamabad Electric Supply Company. However, the proposed privatisation is not expected to immediately resolve the broader circular debt problem because a substantial portion of sector losses originates from other distribution entities. Earlier, the government had considered a model under which profitable distribution companies would be combined with loss-making entities before privatisation. The plan, however, was subsequently abandoned in favour of offering comparatively stronger companies separately. Experts have repeatedly argued that privatisation alone cannot eliminate circular debt unless the underlying issues of electricity theft, poor recoveries, governance and operational losses are addressed across the entire distribution network. K-Electric dispute adds to debt Payment disputes with K-Electric also contributed substantially to the increase. According to the report, approximately Rs194 billion was added to the circular debt because of non-payments by K-Electric. The company’s outstanding payments are linked to a dispute concerning the delayed finalisation of its multi-year tariff by the National Electric Power Regulatory Authority. The prolonged disagreement has created financial pressure throughout the power supply chain, adding to the accumulation of unpaid liabilities. In addition, around Rs75 billion was added to the circular debt because of delays in tariff adjustments. The government, meanwhile, made payments of approximately Rs129 billion against principal loans of the power sector. Without these payments, the annual circular debt flow could have exceeded Rs600 billion, according to the figures. The Power Division also benefited from a reduction of around Rs98 billion in the circular debt flow because of subsidy payments. Interest payments add further pressure Interest charges also contributed to the accumulation of liabilities, adding around Rs14 billion to the circular debt during the fiscal year. These financing costs ultimately increase the burden on consumers because the cost of servicing the sector’s outstanding liabilities is recovered through electricity bills. Consumer groups have frequently criticised the practice, arguing that households and businesses that regularly pay their electricity bills are effectively being charged for inefficiencies, theft and non-payment elsewhere in the system. Subsidies and burden on consumers The government’s continued reliance on subsidies has helped prevent an even larger accumulation of circular debt, but it has also placed pressure on the national budget. The power sector received hundreds of billions of rupees in subsidies during the year, while the government simultaneously pursued tariff increases and other measures intended to improve cost recovery. The contrast has raised questions about whether existing policies are addressing the underlying causes of circular debt or merely shifting the burden between consumers, the federal budget and power-sector entities. The government has also been under pressure to address similar financial problems in the gas sector. Although no comparable subsidy was provided for the gas sector, the authorities were expected to prevent a further increase in its circular debt. The government reportedly refrained from passing the full reduction in gas prices on