In order to avoid future budgetary obligations, the federal government has promised the IMF that the semi-annual gas tariff adjustment, as decided by the Oil and Gas Regulatory Authority (Ogra), will be disclosed by February 15, 2025, and that it will thereafter be informed within 40 days.
The Fund stated in its most recent report, “2024 Article IV Consultation and application for an Extended Arrangement over The Extended Fund Facility,” that the need for more costly RLNG imports was effectively subsidized by long-standing underpricing against a rapidly depleting supply of domestic natural gas.
Due to the circular debt (CD) surge for gas during the 2020–2023 fiscal year, the energy industry has emerged as a significant source of macro-fiscal risk. Starting in early 2023, Pakistan started adjusting rates dramatically in accordance with expenses. As of the end of January 2024, the circular debt of the gas industry amounted at Rs 2,083 billion, or 2.0 percent of GDP, according to the fund.
The main government reforms that were shared with the IMF center on phasing out captive power by the end of January 2025 in order to guarantee that users migrate to the electrical grid.
This will direct scarce gas resources toward more effective gas-based power generators and lower power generation costs.
Additionally, the pricing structure will be more uniform, notably through the continued application of the weighted-average cost of gas offering (WACOG).
Introducing the semi-annual gas tariff decisions by the Ogra automatically; improving monitoring and analysis through more circular debt modifications; and expanding on ongoing initiatives.
Following the legislative adoption of a budget for fiscal year 2025 in accordance with the IMF staff agreement and the announcement of the semi-annual changes to the gas tariff, all previous steps have been fulfilled.
