The Pakistani government has developed a comprehensive 10-year strategy to eradicate the gas sector’s circular debt, which has ballooned to approximately Rs 3.4 trillion (including Rs 1.8 trillion in principal liabilities).
The plan focuses on financial restructuring, policy measures, and phased interventions to stabilize the sector amid ongoing energy challenges.
Key Elements of the Plan The initiative targets the elimination of over Rs 1.5 trillion in liabilities through immediate settlements and long-term mechanisms.
This includes waiving around Rs 1.6 trillion in government surcharges to relieve pressure on gas companies, alongside bank refinancing for remaining amounts.
Sources indicate the plan proposes a Rs 5 per litre levy on petrol and diesel to generate dedicated funds for clearing these obligations.
Funding Sources and Timeline Short-term actions aim to settle roughly Rs 1.5 trillion promptly, while the broader debt resolution unfolds over the decade.
Funding draws from dividends and payouts by major state-owned energy companies, savings from LNG imports, and the proposed petroleum product levy. The remaining portion of the debt is tied up in tax refunds and legal disputes, limiting full immediate clearance.
IMF Approval and Sector Implications The strategy requires approval from the International Monetary Fund (IMF), with hopes for endorsement before the next federal budget to incorporate provisions. This reflects efforts to address surging circular debt amid regional instability and supply issues.
Successful implementation could stabilize gas companies like Sui Northern and Sui Southern, reduce fiscal strain, and prevent further accumulation of liabilities.
However, the proposed fuel levy may raise consumer costs for petroleum products, adding to economic pressures in an already challenging environment.