IMF Warns Against Gas Price Reduction in Pakistan

Meanwhile, the International Monetary Fund is seeking to limit the federal government's ability to reduce gas rates in Pakistan, warning that downward tariff revisions could rise the gas sector's circular debt.

Key points

• The rising circular debt is additionally affecting state owned exploration and production businesses, including Oil and Gas Development Firm, Pakistan Petroleum and Administration Holdings Private Limited.
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• The practice of regularly adjusting consumer gas rates in line with OGRA determinations was followed until fiscal year 2013 but was subsequently discontinued.
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• Under the existing framework, OGRA determines wellhead gas rates and the revenue requirements of Sui gas businesses twice a year.

Notably, the IMF raised the matter during its reviews of Pakistan's Extended Fund Facility and Standby Arrangement, with the administration subsequently amending the Oil and Gas Regulatory Authority Ordinance in March 2022 to limit its powers to reduce tariffs. The administration additionally committed to revising consumer gas rates in line with OGRA determinations. Govt To Introduce New Telecom Bill After Withdrawing Controversial Draft.

Pakistan's gas sector operates differently from the power sector, where the administration budgets subsidies to cover tariff differences. Gas rates have largely relied on a cross subsidy mechanism, with higher tariffs for some consumer categories helping protect vulnerable residential consumers.

Under the existing framework, OGRA determines wellhead gas rates and the revenue requirements of Sui gas businesses twice a year. The federal administration then has 40 days to advise on the determinations before consumer costs are notified.

For context, the practice of regularly adjusting consumer gas rates in line with OGRA determinations was followed until fiscal year 2013 but was subsequently discontinued. This contributed to the buildup of tariff differences, including from the diversion of re-gasified liquefied natural gas to the domestic sector without a firm mechanism to recover its full cost. Pakistan's Refineries Set to Sign $6 Billion Modernization Agreements.

Meanwhile, the gas sector's circular debt stood at Rs. 3, 288 billion as of June 30, 2025, including Rs. 1, 468 billion in interest costs. Under the IMF program, Pakistan agreed to establish a clear definition of gas circular debt, verify its stock, introduce monthly reporting and prepare a circular debt management plan.

Meanwhile, the plan calls for regular adjustments to end user gas rates according to established formulas, along with measures to reduce costs and cut unaccounted for gas losses. The World Bank has additionally assisted the Petroleum Division in developing a definition of gas circular debt and a debt reporting system.

In practice, the rising circular debt is additionally affecting state owned exploration and production businesses, including Oil and Gas Development Firm, Pakistan Petroleum and Administration Holdings Private Limited. Lower bill collections by Sui firms, along with difficulties in the power sector, have rose receivables and weakened the financial capacity of these businesses to invest in exploration and production.

Notably, the administration has separately prepared a petroleum sector reform plan that proposed settling Rs. 1, 493 billion in circular debt over five years. The proposal was presented to the prime minister in December 2025. Stay Connected with ProPakistani.

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Taken together, the developments around IMF Warns Against Gas Price Reduction in Pakistan point to a situation that is still moving, and the coming days should bring more clarity.