Pakistan, IMF move forward with talks on energy sector debt plan

Talks between Pakistan and the International Monetary Fund (IMF) on resolving the country’s mounting energy sector circular debt have been positive, with no signs of disagreement or delay, officials said Saturday.

Highly placed sources told Nukta that the IMF has shown a constructive attitude toward Pakistan’s proposal to address the gas sector circular debt, which is estimated at PKR 2.84 trillion, or about 2.7% of GDP.

The plan centers on a strategic dividend-based approach involving state-owned enterprises (SOEs).

According to officials, the IMF has requested detailed presentations and supporting data from Pakistan’s ministries, including financial statements and forward-looking projections from the involved entities.

These formal submissions are expected on Monday.

“There was no disagreement in the meeting. The IMF asked pertinent questions and requested detailed data. They are reviewing the proposed framework seriously,” a senior official involved in the discussions said, dismissing any reports of an abrupt rejection or negative fallout.

The proposed dividend mechanism focuses on settling a large portion of the circular debt, especially inter-agency receivables within the public sector. Officials stressed that this option would not burden Pakistan’s fiscal accounts and would allow old debts to be cleared transparently, without harming future investments by the entities.

Sources also clarified that no part of the talks touched on past share price performances of companies in the energy chain, such as Pakistan State Oil (PSO) or upstream oil and gas firms.

On the power sector front, officials said the government has nearly finalized a major circular debt resolution package worth PKR 1.275 trillion.

Under an agreed framework with commercial banks, PKR 683 billion will be settled through the Pakistan Holding Company, while PKR 592 billion will be provided as a direct cash injection. This process is expected to conclude within the next month.

Officials acknowledged that profitability in the exploration and production (E&P) sector has softened due to falling global oil prices, reduced production, and exchange rate pressures.

However, they stressed that the dividend plan accounts for these challenges and ensures that only prudent, available earnings will be used, without affecting the operational strength of the companies.

“Nothing has been finalized yet. The IMF will review the submissions and respond after due diligence. But it’s important to highlight that there is no conflict or rejection—only technical engagement is underway,” another senior source emphasized.

The government has already stopped any new accumulation of circular debt flow, in line with its agreements with the IMF.

Clearing the backlog of accumulated power and petroleum sector circular debt remains a key part of Pakistan’s broader energy sector reform strategy.

According to the proposed gas sector plan, the goal is to eliminate the circular debt stock over the next five years.