There are two options.
Try this option:
let g:Powerline_stl_path_style = 'short'
In powerline docs:
short Display a short path. The home directory is substituted with "~", the first directory is displayed with its full name, and subsequent directories are shortened to their first letter. Ie "/home/user/foo/bar/baz.vim" becomes "~/f/b/baz.vim" and "long/relative/path/foo/bar/baz.vim becomes "long/r/p/f/b/baz.vim".
Or, if you want the path to be truncated as the default status line of Vim, you can create a theme that moves the truncation point . Try the sanity theme and see if it works best for you.
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