ISLAMABAD | July 24, 2025
With Pakistan’s energy sector grappling under the weight of ballooning circular debt, the International Monetary Fund (IMF) has formally asked the government to present a detailed and time-bound plan to address the mounting crisis — a move that underscores the Fund’s growing concerns over the country’s fiscal vulnerabilities.
Gas Sector Debt Hits Alarming High
According to official sources familiar with the matter, circular debt in the gas sector alone has reached a staggering Rs2,800 billion, placing immense pressure on both Sui gas companies and other public-sector oil and gas enterprises. The unsustainable debt levels have now become a central point in ongoing talks between Islamabad and the IMF.
“The Fund wants more than vague commitments. They’re asking for a clear roadmap backed by real numbers, timelines, and structural reforms,” said a senior government official, speaking on condition of anonymity.
Government’s Multi-Pronged Strategy in the Works
In response, the government is drafting what insiders describe as a multi-pronged strategy to rein in the debt. One major component includes securing a Rs2,000 billion loan from domestic banks, ideally at reduced interest rates.
Discussions are underway with financial institutions to either lower or waive interest charges, in order to soften the repayment blow. The government is also contemplating the introduction of new revenue measures aimed specifically at offsetting the cost of the loan.
Consumers May Bear the Burden
Among the proposals under serious consideration is a petroleum levy ranging between Rs3 to Rs10 per litre, a move that could generate an estimated Rs180 billion on its own. Additionally, an extra surcharge on gas bills is also being weighed — a decision that, if implemented, would directly affect millions of consumers already dealing with high inflation and rising utility costs.
Officials insist that any such levies would be gradually introduced and accompanied by targeted subsidies for lower-income households.
Five-Year Loan Repayment Timeline
The proposed bank loan, if finalized, will reportedly be repaid over a five-year period. However, experts caution that without broader reforms — especially efforts to curb operational losses and improve efficiency within gas companies — any such financial patchwork could prove temporary.
“This isn’t just about raising money; it’s about fixing the leak. Until you reduce the technical and administrative losses in the system, you’re just pouring water into a broken bucket,” warned an energy sector analyst based in Islamabad.
IMF Watching Closely
The IMF, currently in advanced negotiations with Pakistan over a new long-term bailout package, views the energy sector’s inefficiencies as a structural risk to the country’s fiscal health. The Fund has made it clear that resolving circular debt is non-negotiable if Pakistan wants continued support.
As the clock ticks, the government now finds itself in a tight spot — juggling public expectations, economic realities, and IMF demands — all while trying to ensure that reforms don’t trigger political backlash.
For now, all eyes are on Islamabad to see whether it can put forward a plan bold enough to satisfy the IMF, yet realistic enough to implement without tipping over a fragile economic balance.
