Govt, IMF begin talks on circular debt resolution

February 06, 2024 (MLN): The long-awaited negotiations between the government and the International Monetary Fund (IMF) regarding the settlement of the energy sector's circular debt have started, according to media reports.

To note, the circular debt in the energy sector stands at Rs5.7 trillion as of November 2023, comprising Rs2.7tr and Rs3tr in power and gas sector debts, respectively.

The circular debt settlement plan aims to clear approximately Rs1.1tr of gas circular debt and disburse Rs0.25tr to settle power circular debt.

The settlement plan aims to improve the financial situation of energy companies. To do this, the government will pay the gas utilities, which will then distribute the money to the SOEs that need it most, such as Exploration & Production (E&P) and Oil Marketing Companies (OMCs).

The Ministry of Energy (MoE) has stated that a grant of Rs745 billion will be required to initiate the entire settlement process, as per media reports.

The settlement would be budget neutral and the government is expected to receive Rs743bn in dividends and withholding taxes.

The government will be injecting Rs556bn in Oil & Gas Development Company Limited (PSX: OGDC), Rs168bn in Government Holdings (Private) Limited, Rs146bn in National Power Parks Management Company, Rs83bn in Pakistan Development Fund Ltd (PDFL), and Rs29bn in Pakistan State Oil Company Limited (PSX: PSO).

With this settlement, OGDC and PPL are expected to announce dividends of Rs108.6 per share and Rs46.3 per share respectively, said Arif Habib Limited.

Additionally, AKD anticipates dividends of Rs109 and Rs46 for the aforementioned companies.

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