NA Finance Panel Warns Energy Prices Surged 68pc Amid Circular Debt Crisis

Pakistan's electricity, petrol, diesel, and LPG prices surged between 43 percent and 68 percent in the current fiscal year, a United Nations Development Programme (UNDP) economist told the National Assembly's Standing Committee on Finance and Revenue on Monday, as lawmakers simultaneously accused the government of breaching its own budget laws and making little headway on energy sector reforms.

Committee Holds Government to Account on Budget Compliance

The committee meeting, chaired by former finance minister Syed Naveed Qamar of the PPP, found that the government had failed to circulate and publish the Budget Strategy Paper (BSP) by May 10 — the statutory deadline. The BSP is a pre-budget document that outlines the government's fiscal strategy and must be published ahead of the annual federal budget to allow parliamentary and public scrutiny.

Qamar also raised alarm over the government's continued heavy reliance on indirect taxes and the petroleum levy rather than broadening the tax base. For energy consumers, this matters: the petroleum levy is a key component of fuel pricing and feeds directly into the cost of running generators, powering transport, and — through fuel dispatch costs — into electricity tariffs set by NEPRA (the National Electric Power Regulatory Authority).

UNDP Warns of Energy-Driven Inflation on a Fragile Stabilisation Path

Dr Ali Salman, a private economist and public financial management specialist representing the UNDP, told the committee that Pakistan remains on a fragile stabilisation path. His key findings included:

• Economic growth is recovering slowly, but per capita income remains weak.
• Inflation is projected to exceed 12 percent, even as the economy edges upward.
• Prices of petrol, diesel, LPG, wheat flour, electricity, and onions rose between 43pc and 68pc during the current fiscal year.
• Inflationary pressures are increasingly concentrated in energy and essential food items, hitting household purchasing power hardest.

Dr Salman did acknowledge two relative bright spots: inward remittances from overseas Pakistanis are holding up well, and government expenditure management has shown some discipline. He cautioned, however, that fiscal control is largely a function of falling interest rates rather than structural reform — a distinction that matters for the sustainability of any improvement.

Circular Debt and DISCO Reforms Remain Stalled

The committee separately flagged the growing circular debt in the energy sector — the accumulating pile of unpaid obligations between independent power producers (IPPs), electricity distribution companies (DISCOs) such as LESCO (Lahore Electric Supply Company), IESCO (Islamabad Electric Supply Company), PESCO (Peshawar Electric Supply Company), and HESCO (Hyderabad Electric Supply Company), and the government itself. Pakistan's power-sector circular debt runs into the trillions of rupees and has been a persistent structural driver of tariff increases year after year.

Qamar criticised the slow pace of reforms in state-owned enterprises (SOEs), including loss-making DISCOs. Until DISCOs reduce technical and commercial losses — or are meaningfully reformed, privatised, or restructured — the cost of their inefficiency is ultimately passed on to consumers through NEPRA-approved tariff and fuel cost adjustments. The committee also raised broader socio-economic concerns, including rising unemployment and poverty, which compound the impact of higher energy costs on vulnerable households.