Pakistan, IMF remain split over gas debt resolution plan

July 21, 2026 (MLN): A fresh round of virtual negotiations between Pakistan and the International Monetary Fund (IMF) has ended in deadlock, with the two sides unable to agree on a mechanism to unwind close to Rs1.7tr worth of circular debt piled up in the gas sector.

At the heart of the disagreement, sources said, is a Fund demand that Islamabad stop treating unpaid dues owed to the country's two state-run gas utilities as recoverable receivables and instead record them outright as losses.

Government negotiators have pushed back, and with no middle ground found, the matter has been kicked forward to another round of talks slated for September.

The mechanics of the IMF's proposal would see the utilities absorb the write-down directly on their books first, with the government stepping in afterward to recapitalize the companies through fresh capital injections, according to the sources.

That sequencing is precisely what has Petroleum Division officials worried.

Recognizing the receivables as losses upfront, they argue, risks denting the utilities' balance sheets and rattling investor sentiment enough to pressure their stock prices downward, a trade-off Pakistan is reluctant to accept even as the debt pile grows.

Circular debt across the gas sector has now risen to almost Rs3.3tr, sources tracking the talks said, placing it among the heaviest unresolved burdens on the country's energy sector.

With September now set as the next checkpoint, officials say the framework for a final settlement remains unsettled, though whatever revised plan emerges is expected to lean into the Fund's broader push for cleaner, more transparent gas-sector accounting and a debt strategy built to hold up over the longer term.

Energy analysts said the IMF's stance reflects a broader effort to bring Pakistan's energy-sector accounting in line with international financial reporting standards by recognizing receivables that may no longer be recoverable.

It was noted that while booking the receivables as losses would improve transparency, it would also carry a significant short-term impact on the utilities' balance sheets and require substantial government recapitalization leaving the government to balance IMF program requirements against the risk of unsettling markets and company financials.

Analysts further pointed out that resolving the circular debt remains a core structural benchmark under Pakistan's IMF-backed program, with the mounting liabilities continuing to strain both the energy sector and public finances more broadly.

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