ISLAMABAD: Pakistan's ongoing talks with a visiting International Monetary Fund staff mission are set to conclude positively later this week, clearing the way for the disbursement of about $1.2 billion under two concurrent programs, officials said.
The funding would come under the $7 billion Extended Fund Facility and the $1.4 billion Resilience and Sustainability Facility.
Informed sources said the two sides were finalizing the Memorandum of Economic and Fiscal Policies after covering the substantive parameters of the biannual review. The staff mission, led by Iva Petrova, is expected to wrap up its visit in the coming days.
There were no new demands from the Fund except for makeup adjustments to bridge past slippages, the sources said. The revenue target remains unchanged, with greater focus on achieving the half-yearly target following robust first-quarter collections that exceeded the goal.
The development comes as Pakistani authorities struggle to finalize a liquefied natural gas import plan for the upcoming three winter months — December through February — amid a challenging supply situation stemming from the U.S.-Iran conflict.
Gas companies and the petroleum division had sought at least 22 import cargoes for the three-month period. But the energy task force, led by Lt. Gen. Zafar Iqbal, has promised no more than 10 to 12 cargoes of around 100 million cubic feet each on a best-effort basis, using all diplomatic and logistical channels.
The plan will be presented to the prime minister for approval, given the involvement of around $100 million per spot cargo and the need for consent from the Ministry of Finance and the State Bank of Pakistan.
The matter has taken on greater importance because the LNG import plan will affect current account targets agreed upon by the Ministry of Finance and the IMF. Sources indicated actual LNG imports may not exceed seven or eight cargoes over the three winter months given prevailing market conditions, bringing the outcome closer to the Finance Ministry's desired level.
The two sides have agreed to expedite groundwork for targeted subsidies in the gas sector through the social protection program to contain gas-sector circular debt. They also agreed to move Benazir Income Support Programme-based subsidies for the poorest power consumers into the implementation phase starting in January, following the introduction of the revised base tariff.
Distribution companies have already filed tariff petitions during the talks to demonstrate their preparedness to the IMF team, the sources said.
The government has assured the Fund of plans to reduce cross-subsidies from the industrial sector and contain gas-sector debt, which has now reached 3.6 trillion rupees and continues to rise. That includes principal payables of around 1.8 trillion rupees and almost an equivalent amount in accrued interest and late-payment surcharges.
Gas companies have reported that the introduction of a protected category for domestic consumers, involving gas prices of 200 to 350 rupees per mmBtu, has aggravated the pricing gap and increased circular debt. Only four of the 12 consumer slabs covered the cost of gas supply during the winter months, while the remaining eight stayed below breakeven rates for around eight months despite substantial fixed charges.
Although the measures are not being defined as prior actions, authorities may have to take steps between the conclusion of the IMF talks and the scheduling of the Fund's Executive Board meeting to ensure smooth processing of Pakistan's case for the $1.2 billion disbursement and to seek waivers for a couple of unavoidable slippages against end-June 2026 targets.
An IMF structural benchmark committed by the government requires a major policy reform by the end of January 2027 to replace the budgeted tariff-differential subsidy and cross-subsidy system with a targeted, budgeted subsidy framework for low-income consumers through BISP.
The World Bank is assisting the government in linking power consumers to the National Socio-Economic Registry. The government has undertaken to complete the technical linkage, along with validity checks, by the end of November to determine eligibility criteria.
The IMF is also pushing for greater transparency in the Inland Freight Equalisation Margin, which facilitates uniform petroleum pricing across the country.
