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Aftab Maken
ISLAMABAD: The International Monetary Fund (IMF) has proposed a new set of conditions for resolving Pakistan’s mounting gas sector circular debt, including formally recognizing the financial losses of the country’s two state-owned gas utilities and writing off unrecoverable receivables in their accounts.
According to sources, the IMF has asked the government to accurately reflect the companies’ financial position by booking accumulated losses in their financial statements. Once the losses are recognized, the Fund has recommended recapitalizing the gas companies to restore their financial health and improve their long-term sustainability.
Sources said officials in the Petroleum Division are reluctant to accept the proposal, fearing that recognizing the losses could significantly reduce the value of the state-owned gas companies and negatively affect their balance sheets.
Pakistan’s gas sector circular debt has now climbed to Rs3.607 trillion, highlighting the severity of the financial crisis facing the energy sector. Of this amount, the principal liabilities stand at Rs1.884 trillion, while late payment surcharges (LPS) and penalties have surged to Rs1.723 trillion due to persistent delays in settling outstanding payments.
Energy sector experts say the figures underscore years of poor financial discipline, noting that nearly half of the circular debt now consists of penalties and financing costs rather than the original liabilities. They argue that timely payments could have prevented the accumulation of such a massive surcharge burden.
Under the settlement plan currently under discussion, the government is considering resolving Rs1.7 trillion of the total circular debt in the initial phase.
However, sources said recent virtual negotiations between Pakistan and the IMF failed to produce a final agreement on the settlement mechanism. The two sides are expected to resume discussions in September, with officials anticipating that the revised settlement plan will largely incorporate the IMF’s recommendations in an effort to place the gas sector on a more sustainable financial footing.
