What is Circular Debt – Pakistan Record High Circular Debt – Movingtrend

In Circular debt all the members are both creditor and debtor; and in the end all the balance of all the debts between individuals is Zero.

Pakistan is currently facing Circular Debt of Rs 12 billion
Circular debt is the condition when one party or group is unable to pay to its supplier withholding payments. It is not restricted specifically between creditor or debtor but it affects all the entities in the supply chain. The consequences of the circular debt are very harmful as none in supply chain entities are able to function at full capacity.

What is Circular Debt?
Let’s consider there are three persons in a room named X, Y and Z. Person named X pays Rs 500 to person named Y. Y pays Rs 500 to person named Z. Z pays Rs 500 to Person named X. This condition called circular debt.

In the Circular Debt all the members are both creditors and debtors; for example Person X is behaving as debtor for person Y, but at the same time it is creditor for the Person Z. In the end all the balance of all debts between the individuals is Zero.

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