ISLAMABAD: Pakistan will halt approvals for new power generation contracts as it seeks to rein in ballooning energy sector costs and ease pressure on public finances, the information ministry said on Thursday, citing officials.
Pakistan’s power sector had accumulated more than Rs2.6 trillion (about $9.3 billion) in circular debt as of mid-2025, according to official data, with distribution losses, electricity theft and weak bill recovery being the key factors behind it.
The country, currently navigating a tricky path to economic recovery under a $7 billion International Monetary Fund (IMF) program, has committed to reforms in the power sector as a central pillar of the bailout. The World Bank has also linked future energy-sector financing to progress on structural reforms.
In a meeting on Thursday, Energy Minister Awais Leghari briefed German Ambassador Ina Lepel on ongoing reforms in the energy sector, saying around 55% of Pakistan’s energy mix came from clean sources and the government is working to gradually increase this share to 90%.
“Around 800 megawatts of renewable energy is being planned through a competitive market mechanism,” he was quoted as saying by the information ministry. “The government will not pursue new power purchases beyond already committed agreements.”
Pakistan’s total installed power generation capacity reached 46,605 megawatts last year, according to Karachi-based JS Global Capital Ltd. The South Asian nation generated 24% electricity from hydel, 31 percent from coal, one percent from furnace oil, 22 percent from nuclear plants and 17 percent from gas.
The country has also seen an unprecedented boom in rooftop solar systems over the past three years as households and businesses turned to private generation to escape record electricity prices, frequent outages and inflation-driven energy costs.
Solar power grew from 4% of the energy mix in 2021 to over 14–25% in 2024-2025, official figures showed. Driven by skyrocketing grid tariffs, Pakistan became one of the world’s top new solar adopters, importing roughly 22 gigawatts (GW) of solar panels in 2024 alone. Industry data showed tens of thousands of new solar connections have been added annually, significantly reducing demand from the grid during daylight hours.
Leghari said Pakistan remained close to “70% self-sufficiency in the energy sector last year.”
Earlier this year, Pakistan appointed financial advisers and launched sell-side due diligence for the privatization of power distribution companies (DISCOs), marking a long-awaited step in power-sector reforms.
Leghari said three out of eleven DISCOs have been selected for initial privatization and more companies will be added in the next phase.
During the meeting, he emphasized the need for investment in Pakistan’s power transmission infrastructure, saying the expansion and upgrade of the transmission network required significant funding.
The [German] ambassador reiterated interest in small hydropower, solar and sustainable energy projects and appreciated Pakistan’s reform direction,” the information ministry said. “Both sides agreed to enhance technical level engagement in the energy sector.”
