ISLAMABAD: The International Monetary Fund (IMF) has raised serious concerns over Pakistan’s proposed gas circular debt management strategy, questioning key components of the plan including a proposed petroleum levy and the use of dividends from state-owned energy companies to retire mounting liabilities, officials familiar with the discussions said.
According to sources, the government recently presented its framework to the IMF as part of ongoing programme negotiations. However, contrary to earlier impressions, the Fund has not approved the plan and has instead sought detailed clarifications on several policy measures.
Officials said IMF representatives reviewed the presentation submitted by the Petroleum Division but flagged potential risks, warning that an additional levy on petrol and diesel could increase fuel prices and intensify inflationary pressure on consumers. The Fund also questioned whether diverting dividends from public-sector energy companies toward debt reduction is consistent with standard fiscal and corporate governance practices.
The IMF is expected to formally communicate its queries to Pakistani authorities in the coming days, after which Islamabad will submit written responses.
Pakistan’s gas sector circular debt has surged to around Rs3.4 trillion, largely driven by late payment surcharges (LPS) estimated at Rs1.6 trillion. Excluding tax-related adjustments, the underlying debt stock stands at approximately Rs1.5 trillion, according to official estimates.
The rising liabilities have significantly strained the energy supply chain, with exploration and production companies — including Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), Mari Energies Limited, Government Holdings Private Limited (GHPL), MOL Pakistan, and Oil and Gas Development Company Limited (Pakistan Oilfields Limited) — awaiting nearly Rs1.5 trillion in outstanding payments from gas utilities.
To address the crisis, a high-level committee chaired by Deputy Prime Minister Senator Ishaq Dar approved a multi-pronged debt management plan earlier in January 2026. The committee includes key federal ministers along with representatives from the Special Investment Facilitation Council (SIFC) and the Energy Task Force.
The plan proposes a mix of fiscal and operational reforms aimed at gradually retiring the circular debt over five years. One major proposal includes imposing a petroleum levy of up to Rs5 per litre on petrol and diesel, expected to generate around Rs90 billion annually.
The government also plans to divert 35 liquefied natural gas (LNG) cargoes to international markets in 2026, a move officials estimate could save more than $1 billion in import costs and generate approximately Rs160 billion annually.
Another key measure involves waiving late payment surcharges for government-owned entities within the gas value chain, on the basis that both buyers and sellers are state-controlled. However, Pakistan State Oil (PSO) would still be required to settle surcharge liabilities due to its exposure to commercial bank borrowing.
Authorities have also proposed eliminating nearly Rs210 billion in accumulated GST and income tax-related liabilities in the gas sector as part of the restructuring plan.
Officials claim some improvement has already been achieved, with RLNG diversion losses reduced from Rs242 billion to Rs185 billion, resulting in savings of Rs57 billion. In addition, improved recovery efforts by Sui Northern Gas Pipelines Limited and Sui Southern Gas Company have generated Rs61 billion in additional collections.
The IMF has repeatedly flagged Pakistan’s expanding energy sector circular debt as a major fiscal risk, warning that unchecked growth in liabilities could undermine macroeconomic stability, discourage investment, and further strain the country’s energy sustainability.
Story by Khalid Mustafa
