Pakistan Must Cancel Rs. 129 Billion Gas Subsidy to Get New And Much Bigger IMF Program

The Government of Pakistan must meet several key requirements including cancelling Rs. 129 billion in gas subsidies to qualify for a bigger $8 billion IMF Extended Fund Facility (EFF) program. Pakistan must withdraw the cross-subsidy of Rs. 100 billion to protected gas consumers and another subsidy of Rs. 29 billion in RLNG diversion by June 2024. It must also submit a circular debt management plan and an audit report of SSGC by the same deadline. Another item mandates authorities to transition industry-based captive power plants onto the national grid by the end of this year. The IMF wants weighted average cost of gas (WACOG) to come back and the withdrawal of gas subsidy from the fertilizer sector, which started last month. Notably, a plan is in the works to end the provision of cheaper gas from Mari Gas to certain fertilizer plants later on. The IMF wants biannual price reviews in gas rates to prevent further spikes in circular debt. The government has been asked to submit an improved circular debt reduction plan after the previous one was rejected last month. The IMF demands an audit report of SSGC by June 2024 to understand why it has become a loss-making entity. It has been pointed out that the underlined measures are crucial for securing a new bailout program.