IMF Praises Pakistan Oil Management While Demanding Gas Reforms
The International Monetary Fund commended Pakistan for successfully handling the recent six-month U.S.-Iran conflict without domestic oil supply shortages or added budgetary strain. However, during discussions ending October 2, 2026, the lender urged authorities to accelerate structural fixes for the escalating gas sector circular debt and implement targeted subsidies.
The Bottom Line
- Circular Debt Burden: Gas sector payables and liabilities reached approximately Rs3.6 trillion, driven by below-cost consumer tariffs and low metering documentation rates.
- Power Sector Outperformance: The power sector exceeded efficiency targets in bill recoveries and loss reduction, despite an increase in circular debt attributed largely to lower Ministry of Finance disbursements.
- Direct Subsidy Pivot: Government and IMF teams are scheduled to finalize plans next week to transition power consumers to direct cash transfers via the Benazir Income Support Programme.
Evaluating the Petroleum Resilience Amid Regional Strains
During the recent six-month US-Iran conflict, Pakistan maintained steady petroleum product supplies without imposing additional burdens on the national budget. Despite these accolades on the liquid fuel front, the multilateral lender pressed Islamabad to resolve systemic issues plaguing the gas supply chain.
The Petroleum Division, headed by Minister Ali Pervaiz Malik, has pushed for a uniform gas tariff aligned with the Oil and Gas Regulatory Authority’s calculated cost of supply. That benchmark sits between Rs1,700 and Rs1,750 per million British thermal units for the country’s two primary gas utilities.
Data and Ownership Obstacles Delaying Gas Subsidies
Initial assessments revealed that the gas sector remains unready due to fundamental data and ownership hurdles. Widespread documentation gaps regarding gas meters and premises complicate efforts to accurately identify households living below the poverty line.
| Sector / Metric | Reported Figure | Key Structural Challenge |
|---|---|---|
| Gas Sector Circular Debt | ~Rs3.6 Trillion | Outdated meter ownership and below-cost winter consumer slabs |
| Power Sector Circular Debt | ~Rs1.675 Trillion (June 2026) | Lower Ministry of Finance tariff differential subsidy disbursements |
| K-Electric Dispute | ~Rs200 Billion | Delayed disbursements tied to ongoing regulatory litigation |
Property owners frequently skip reporting name changes or ownership transfers for decades to dodge security deposits and administrative fees. Consequently, meter-based poverty targeting remains unreliable. Commercial properties exacerbate the issue, changing hands frequently under traditional lease arrangements like “pagri” while official utility titles stay unchanged.
Power Sector Efficiency Metrics and Next Week Policy Talks
While gas infrastructure reform faces delays, the power sector demonstrated concrete operational improvements. The IMF initially questioned a Rs65 billion to Rs70 billion expansion in power sector circular debt, which reached Rs1.675 trillion at the close of June 2026. Reviewing the metrics, the Fund acknowledged that power utilities overperformed on efficiency targets, including loss reduction and bill collections.
The overall rise in power debt stemmed largely from approximately Rs95 billion in reduced Ministry of Finance disbursements on account of tariff differential subsidies. Recovery progress could have accelerated had K-Electric disbursed roughly Rs200 billion on time instead of pursuing legal avenues against regulatory determinations. High courts and appellate tribunals ultimately upheld the regulatory savings framework.
Looking ahead, government officials and IMF representatives will convene next week for policy-level discussions to finalize mechanics for channeling power subsidies directly to eligible low-income households in cash.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
