Key Takeaways
- Pakistan and the IMF have failed to reach an agreement on a proposed settlement plan for gas sector circular debt.
- The government has objected to the IMF's proposal to recognize losses incurred by gas utilities as part of the overall debt.
- Final negotiations on the settlement plan are expected to resume in September.
Pakistan and the International Monetary Fund (IMF) have failed to reach an agreement on a proposed settlement plan aimed at reducing Pakistan’s gas sector circular debt by Rs. 1.7 trillion, according to sources. The total gas sector circular debt has climbed to around Rs. 3.3 trillion.
During recent virtual discussions, the government and the IMF were unable to agree on a framework for reducing the debt burden. The IMF proposed new conditions, including recognizing losses incurred by gas utilities as part of the overall circular debt. Additionally, the lender suggested treating uncollectible receivables as losses before recapitalizing the companies.
Sources told ProPakistani that officials at the Petroleum Division have raised objections to these proposed conditions, arguing that aspects of the framework require further discussion. As a result, final negotiations on the settlement plan have been postponed until September.
The government is expected to revise the debt settlement framework in consultation with the IMF before a final agreement is reached. The plan aims to address mounting financial liabilities in the gas sector, which continue to strain Pakistan’s energy supply chain and public finances.
The gas sector's circular debt has accumulated over several years due to below-cost gas tariffs, high unaccounted-for gas (UFG) losses, delayed government subsidy payments, RLNG tariff differentials, and weak recoveries by state-owned gas companies. The Petroleum Division has been working on measures to improve billing and recoveries, reduce system losses, and restructure liabilities as part of the broader settlement plan.
The failure to reach an agreement is a significant setback for Pakistan’s efforts to stabilize its energy sector. The government hopes that further discussions will lead to a mutually acceptable solution by September.
