IMF Rejects Pakistan’s Request, Demands Gas Levy on Captive Power Plants

The International Monetary Fund (IMF) has declined Pakistan’s request to revise a critical structural benchmark under its $7 billion Extended Fund Facility (EFF), according to Dawn. The IMF has insisted on imposing a significant levy on gas supplied to industrial captive power plants (CPPs), aiming to eliminate the cost advantage CPPs hold over electricity from the national grid.

Under the IMF's conditions, Pakistan must disconnect gas supplies to CPPs by the end of January 2025. Compliance is vital for the release of the second $1 billion tranche, scheduled for March following a review in February.

Despite these terms, the industrial sector, led by textile exporters, and gas utilities like Sui Northern Gas Pipelines Limited (SNGPL), are lobbying against the move. They argue that disconnecting CPPs would lead to a surplus of 50 LNG cargoes annually, disrupting the supply chain and potentially harming export competitiveness. Gas utilities also warn of financial instability, estimating annual losses exceeding Rs400 billion.

The IMF, however, remains firm, proposing an additional levy of Rs1,700-1,800 per unit (mmBtu) on gas supplied to CPPs, which would raise the gas price to Rs5,000 per unit from the current Rs2,800-3,200.

The disconnection risks damaging energy-intensive industries like textiles and could shake investor confidence in Pakistan’s $6 billion LNG infrastructure. Structural reforms remain urgent, but the situation poses significant challenges for the government and key stakeholders