Government to Present Debt Clearance Strategy During IMF Review
Pakistan is preparing a three-year strategy to clear the country’s massive gas-sector circular debt worth around Rs3.6 trillion ($12.9 billion).
The plan will be presented to the International Monetary Fund (IMF) during upcoming economic review talks scheduled for the last week of September.
The Finance Ministry is expected to brief IMF officials on the proposed settlement framework. The final plan will be prepared after discussions with the lender.
Gas Sector Debt Mounts Due to Unpaid Costs
Officials said the gas circular debt has increased due to tariff gaps, unpaid recoveries and policy-related expenses.
The total debt includes around Rs2.1 trillion in accumulated interest and Rs1.5 trillion in principal amount.
A government report highlighted several factors behind the growing burden. These include a Rs1.4 trillion tariff differential, Rs123 billion in power-sector receivables, Rs211 billion in sales and income tax claims, and Rs58 billion in litigation-related costs.
The crisis was further worsened by expensive LNG imports. Gas companies supplied costly imported LNG to domestic consumers, while supply disruptions under Pakistan’s Qatar agreement forced the country to purchase expensive spot cargoes.
Multi-Source Plan to Reduce Financial Burden
The proposed strategy includes multiple measures to manage the debt. Around Rs840 billion is expected through gas company dividends, while Rs270 billion may come from petroleum levy collections.
The government also plans to reduce liabilities by Rs310 billion through delayed LNG cargo arrangements with Qatar.
Additional savings include Rs15 billion through power-sector take-or-pay adjustments and Rs60 billion through complete LNG cost recovery.
Officials said the government also intends to settle the interest portion of the circular debt as part of the agreement.
However, recovering full LNG costs could increase gas prices for consumers and create additional inflation concerns.
The government is expected to discuss these possible impacts with the IMF before finalising the three-year debt clearance plan.
