The International Monetary Fund (IMF) has underscored in its second and final review report that Pakistan’s power sector circular debt, valued at Rs2.6 trillion (equivalent to 2.5% of GDP), has remained relatively stable since October 2023, following some slippage earlier in the fiscal year.
The IMF attributed this stability to lower-than-expected recoveries subsequent to the significant annual tariff rebasing in July 2023. Despite initial challenges, efforts to address the issue have helped stabilize the circular debt, particularly through measures aimed at aligning energy tariffs with costs and implementing anti-theft initiatives in the power sector.
In a commendable move, the overall circular debt stock, encompassing both the power and gas sectors, stabilized in late 2023 and early 2024. This stability was achieved through sustained endeavors to rationalize energy tariffs and implement anti-theft measures in the power sector.
Furthermore, Pakistan took significant steps in the gas sector by implementing a substantial (24% on average) gas tariff increase on February 15. Notably, on the same date, gas prices saw a further hike of 67% for residential consumers and up to 700% for fertilizer plants.
This adjustment in gas prices maintained a progressive rate structure to shield vulnerable residential consumers, while significantly raising and equalizing prices for fertilizer companies. Additionally, it modestly increased prices for captive power and some industrial users, aiming for a fair distribution of costs across sectors.
