ISLAMABAD: Discussions between Pakistan and the International Monetary Fund (IMF) are continuing, but major differences remain over the government’s fuel subsidy programme and the growing circular debt in the gas sector, sources familiar with the talks said.
According to officials, both sides have yet to reach an agreement on petrol pricing policies and the settlement of nearly Rs1.4 trillion in outstanding receivables owed to gas companies. The IMF is urging Pakistan to phase out fuel subsidies and replace them with more targeted support measures, while the government wants to continue providing relief to motorcycle riders and owners of small vehicles for the time being.
IMF Questions Fuel Relief Programme
Sources say the IMF believes the current fuel assistance scheme should not continue beyond a limited period and has raised concerns about its long-term financial impact. Estimates suggest that extending the programme for three months could cost more than Rs75 billion.
During recent discussions, Pakistani authorities shared a detailed breakdown of petrol pricing with IMF representatives. The government explained that imported petrol costs roughly Rs250 per litre, while consumers are paying around Rs390 per litre at retail outlets.
Officials noted that approximately Rs110 per litre consists of taxes, while distribution, transportation and other margins make up nearly Rs27 per litre.
Despite these explanations, the IMF remains opposed to broad fuel subsidies and cross-subsidy arrangements, arguing that such measures can create fiscal pressures and market distortions.
Disagreement Over Gas Sector Liabilities
Another major issue under discussion is the settlement of Rs1.4 trillion in dues owed to gas companies. The IMF is pressing Pakistan to address the financial challenges facing state-owned energy firms and reduce the growing burden of circular debt.
According to sources, circular debt in the gas sector has now climbed to approximately Rs3.6 trillion, making it one of the most significant financial challenges facing the energy industry.
To tackle the issue, the government has proposed a plan that would use tariff differential claims of Sui gas companies along with profits generated by major state-owned energy firms, including Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL) and Government Holdings (Private) Limited (GHPL).
IMF Raises Concerns Over Debt Settlement Plan
The IMF has reportedly expressed reservations about part of the proposal that involves using around Rs850 billion from gas-sector company profits to help clear outstanding liabilities.
Fund officials believe that using corporate profits in this manner may not be financially neutral and could create additional challenges for the sector in the future.
A detailed meeting focused on the administrative framework for managing gas-sector circular debt is expected to take place next week as negotiations continue.
Progress Noted in Gas Sector Reforms
While disagreements remain on key petroleum-related issues, sources said the IMF has acknowledged Pakistan’s efforts to reform the gas sector. The Fund has also appreciated measures aimed at reducing gas theft and improving the sector’s overall efficiency.
Negotiations are expected to continue in the coming days as both sides work toward finding common ground on fuel pricing policies and the long-term resolution of gas-sector debt.
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