Key Takeaways
- The federal government has extended a sovereign guarantee for SNGPL’s Rs. 50 billion financing facility.
- This decision was made due to the utility's inability to repay the loan amid financial challenges.
- The extension is valid until June 30, 2027, and aims to support uninterrupted gas supplies.
The federal government has extended its sovereign guarantee for Sui Northern Gas Pipelines Limited’s (SNGPL) Rs. 50 billion financing facility from Meezan Bank until June 30, 2027. This decision was approved by the Economic Coordination Committee (ECC) following a summary submitted by the Ministry of Energy.
The extension comes after SNGPL failed to develop a viable plan to repay the loan due to worsening financial challenges, including persistent circular debt and weak cash flows within Pakistan’s gas sector. The financing facility originally traced back to March 2023 when the government approved commercial borrowing to help SNGPL make timely payments for imported re-gasified liquefied natural gas (RLNG) supplied by Pakistan State Oil (PSO) and Pakistan LNG Limited, ensuring uninterrupted gas supplies across the country.
According to the Petroleum Division, the new arrangement carries a lower financing cost and is expected to save SNGPL around Rs. 150 million annually. However, the ministry informed the ECC that SNGPL remains unable to repay the loan due to mounting gas sector circular debt, government-directed subsidized gas sales, diversion of expensive RLNG to domestic consumers, and declining demand from captive power plants.
As of December 2025, SNGPL’s receivables had reached Rs. 1.095 trillion, while late payment surcharges stood at Rs. 931 billion. Of the total receivables, around Rs. 819 billion relate to tariff differential claims arising from government pricing decisions.
The Petroleum Division also informed that although periodic gas tariff revisions have largely contained the flow of circular debt since November 2023, no dedicated mechanism currently exists to reduce the accumulated stock of debt. Officials added that a comprehensive Gas Sector Circular Debt Management Plan (CDMP) has been prepared with support from the Task Force on Power Reforms and consultants, including KPMG, and has been shared with the International Monetary Fund (IMF). The IMF has sought clarifications on the plan, and the government expects to implement it during FY27 after receiving the necessary approvals.
The ECC ultimately approved extending the sovereign guarantee for another year, allowing SNGPL to retain the government-backed financing facility while broader reforms to address the gas sector’s financial challenges are pursued. This decision is seen as a temporary measure until more comprehensive solutions can be implemented.
