Pakistan and the International Monetary Fund have discussed changing energy subsidies from tariff relief to direct cash support for poor households.
The proposal aims to better target assistance while preventing further growth in circular debt. Recent discussions focused on using the Benazir Income Support Programme to deliver gas subsidies directly to eligible households.
However, Pakistani officials cautioned that the gas sector currently lacks the required data and clear ownership arrangements. As a result, officials believe a fully targeted subsidy system cannot be introduced immediately.
Gas Debt Reaches Rs3.6 Trillion
Gas-sector circular debt has climbed to around Rs3.6 trillion, according to officials familiar with the matter. Around Rs1.8 trillion represents principal, while the remaining amount consists largely of interest and late-payment surcharges.
The rising debt has increased pressure on authorities to reform the gas pricing and subsidy structure. The IMF has urged Pakistan to accelerate work on targeted support for consumers below the poverty line.
Meanwhile, officials have been examining ways to address the financial pressures affecting gas utilities. Earlier proposals included measures involving gas companies, petroleum levies and LNG costs to reduce the outstanding debt.
Electricity Subsidy Reform Also Under Discussion
A parallel discussion is underway on shifting electricity subsidies from lower tariffs toward direct BISP payments. The proposed approach would allow assistance to reach eligible households without maintaining broad tariff-based relief.
The IMF has previously stressed the need for energy reforms that improve financial sustainability and prevent circular debt from returning. Pakistan and the lender are continuing discussions on how to target subsidies while addressing structural weaknesses in the energy sector.
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