Pakistan State Oil (PSO) says its financial expenses have surged to Rs12 billion citing the deepening circular debt crisis and higher borrowing costs driven by the State Bank of Pakistan’s monetary tightening.
Company confirms most commercial receivables already cleared, PIA and energy sector dues remain pending.
Rising Costs Amid Circular Debt
Pakistan State Oil (PSO), the country’s largest fuel supplier announced on Monday, 25 August 2025 that its financial costs have escalated to nearly Rs12 billion due to the persistent circular debt crisis and high interest rates.
According to the company, its receivables are tied to state-linked entities struggling with delayed payments including Pakistan International Airlines (PIA) and other energy companies.
“These dues are under review at the highest levels of government,” PSO stated, stressing that the issue is being monitored closely.
Commercial Dues Mostly Settled
PSO clarified that aside from circular debt-linked receivables, its commercial transactions remain stable. The company reported that:
- Out of Rs25 billion owed by retailers, a significant portion has already been cleared.
- Pakistan Shipping Corporation’s dues have been fully settled.
- Other pending payments from smaller retailers were described as “minor business transactions.”
The company said these settlements show that its financial stress is primarily linked to circular debt rather than routine commercial dealings.
Impact of SBP Monetary Policy
PSO highlighted that rising borrowing costs have added to its financial burden. The Karachi Interbank Offered Rate (KIBOR) rose by 4.35%, jumping from 17.82% to 22.17% making financing conditions more expensive for companies dealing with circular debt.
This sharp increase, according to PSO, directly affected its balance sheet and pushed financial expenses higher.
Long-Standing Energy Sector Challenge
The circular debt crisis where delayed payments between power producers, fuel suppliers and government entities accumulate into massive shortfalls remains one of Pakistan’s most pressing economic issues.
PSO which plays a critical role in the country’s energy supply chain has repeatedly called for urgent government action to resolve the crisis. Delays in payments from PIA and power sector companies have consistently undermined the company’s financial stability.
Analysts warn that unless the government introduces structural reforms, the circular debt burden could continue to rise straining not only PSO but also other state-owned and private energy firms.
