IMF Praises Pakistan's Oil-Shock Management, but Rs3.6 Trillion Gas Debt Clouds Loan Talks

ISLAMABAD – Pakistan drew praise from the International Monetary Fund for keeping fuel moving through the six-month US-Iran confrontation, but the same talks also laid bare big gaps on gas-sector debt and fuel subsidies, according to differing accounts in the local press.

Dawn, citing informed sources, said the IMF staff mission acknowledged Pakistan's management of petroleum prices without stacking extra weight on the budget or running into product shortages. It also noted that some other regional countries had faced shortages, and fiscal pressure on budgets or on state firms, or both, the paper added. Profit ran a similar report.

Gas debt, the main snag

The compliments came with a nudge: go faster on the circular debt in the gas sector, which Dawn put at roughly Rs3.6 trillion, with about Rs1.8 trillion as principal and a similar slice for interest plus late-payment surcharges.

But switching subsidised gas tariffs to direct cash support through the Benazir Income Support Programme still looks far off. Early conversations apparently ended with the line that the “gas sector is far from ready given data and ownership-related challenges”, sources told Dawn, and IMF staff reportedly still were not sold that the foundation was workable.

The power sector looked better. The Fund apparently agreed that it had “overperformed” on efficiency targets like bill recoveries and loss reduction. Dawn said the two sides are expected to wrap up plans next week for BISP-based cash support for poor electricity customers.

A different picture: talks stalled

Meanwhile, the Express Tribune — also picked up by Profit — painted the negotiations as stuck. Their report said, via officials speaking anonymously, that both sides were deadlocked on a three-month fuel compensation arrangement for motorcyclists and owners of small cars. They were also divided over a proposed write-off of around Rs1.4 trillion in gas companies' receivables.

The Tribune added that the IMF thinks the scheme could end up costing more than the government's Rs75 billion estimate, and it again referenced Pakistan's vow to "refrain from introducing any fuel subsidy or cross-subsidy scheme". On the other hand, the Petroleum Division, according to the paper, pushed back on the write-off, saying the government cannot just backtrack on its commitments to gas distribution and exploration companies.

The Fund has also, according to the Tribune, questioned using Rs850 billion in gas company dividends to clear the debt, describing the deal as not fiscally neutral. A more detailed meeting on the gas debt plan is expected next week.

All of this is tied to the fourth review of Pakistan's $7 billion loan programme, along with Article IV consultations. Both sets of reporting pointed to unnamed sources, and none quoted an IMF spokesperson, so the details remain contested.