IMF Praises Pakistan Oil Management And Urges Gas Reforms
The International Monetary Fund praised Pakistan on October 2, 2026, for handling a six-month oil crisis without supply disruptions or added budgetary strain during the US-Iran conflict, while simultaneously urging faster groundwork on managing a Rs3.6 trillion gas sector circular debt and shifting subsidies to the poor. Dawn reported these developments from Islamabad, noting that visiting IMF staff met with local officials to review fiscal targets across the nation’s energy grid.
Reports also covered the discussions, emphasizing that initial evaluations concluded the gas sector is far from ready for direct cash transfers due to severe data and ownership challenges. The concurrent reports outline a complex fiscal situation where petroleum management succeeded, yet structural gas and power liabilities require immediate policy adjustments ahead of upcoming policy-level talks.
Pakistan Avoids Petroleum Shortages During US-Iran Conflict
Pakistan managed domestic petroleum prices throughout the US-Iran conflict without triggering product shortages or straining state finances. Dawn reported that the IMF contrasted this performance with other regional nations that faced supply disruptions or heavy fiscal costs for state-owned corporations. Despite these favorable regional comparisons, the Petroleum Division faced hurdles in addressing wider domestic energy imbalances.
Minister Ali Pervaiz Malik’s division advocated for uniform gas rates advised by the Oil and Gas Regulatory Authority (Ogra) to cover actual supply costs of approximately Rs1,700 to Rs1,750 per million British thermal units (mmBtu). The proposal aimed to curtail cross-subsidies from industrial users. However, applying a uniform tariff linked to Ogra’s average prescribed price of Rs1,700 per mmBtu proved premature amid broader logistical realities. Another proposal by the division to raise the petroleum levy by a couple of rupees to finance part of the debt failed to gain favor at government forums and was omitted from IMF discussions.
Gas Sector Circular Debt Reaches Rs3.6 Trillion
The gas sector circular debt has climbed to approximately Rs3.6 trillion. This total comprises about Rs1.8 trillion in principal payables alongside an equivalent amount in accrued interest and late payment surcharges. Dawn noted that protected domestic consumer categories involving gas prices of Rs200 to Rs350 per mmBtu widened pricing gaps and worsened this debt trajectory. Only four out of 12 consumer slabs covered supply costs during the winter months, and rates stayed below breakeven levels for roughly eight months annually despite fixed charges.
Shifting gas-sector subsidies from consumer tariffs to direct cash transfers through the Benazir Income Support Programme (BISP) stalled because of foundational data gaps. Reports indicated that gas-meter ownership and premises documentation remain deeply problematic. Consumers frequently avoid reporting property ownership or name changes for decades to dodge fresh security charges. This practice obscures household poverty metrics. The commercial sector faces similar obstacles, where titles remain unchanged while premises change hands on pagri. Consequently, the IMF remains unconvinced by current groundwork, advising Islamabad to consult experts for a viable long-term mechanism.
Power Sector Overperforms on Efficiency Targets
Power sector metrics presented a sharper contrast to the gas grid. The IMF initially questioned a Rs65 billion to Rs70 billion increase in power sector circular debt, which reached Rs1.675 trillion at the end of June 2026. Fund reviewers acknowledged that the power sector actually overperformed on efficiency targets, including loss reduction and bill recoveries. The overall debt increase stemmed primarily from roughly Rs95 billion in lower disbursements by the Ministry of Finance regarding tariff differential subsidies.
The Ministry of Finance endorsed these figures, explaining that budgeted subsidies exceeded actual requirements calculated from supplied units. Additional friction came from litigation involving K-Electric, which withheld roughly Rs200 billion in disbursements. High courts and appellate tribunals ultimately upheld Nepra decisions securing savings for power companies, though K-Electric retains avenues for further legal remedies. Government officials and the lender will convene next week to finalize practical plans for routing direct cash subsidies to impoverished power consumers through BISP instead of maintaining subsidized tariffs.