IMF Pressures Pakistan to Slash Circular Debt, New Loan and Tariff Hike on the Table

The International Monetary Fund (IMF) has urged Pakistan to curb its circular debt, as a dedicated session was conducted on the circular debt management strategy amid the ongoing discussions between both parties.

As per insider sources, Pakistan informed the IMF delegation that it is devising a strategy to slash circular debt by Rs. 1,250 billion, with an immediate settlement of Rs. 300 billion under consideration. Reports indicate that the government intends to secure a loan of Rs. 1,250 billion from banks to alleviate the financial burden, alongside a proposal to waive late payment surcharges amounting to Rs. 600 billion.

To offset the debt, the government is also contemplating a surcharge of Rs. 2.8 per unit on electricity consumers.

According to reliable sources, a detailed framework to tackle circular debt is in development and will be finalized in the upcoming policy negotiations. Over the past six months, a Rs. 10 billion reduction in circular debt was recorded. However, with electricity demand projected to surge in the next six months, a rise in debt levels is anticipated. The government had previously forecasted a Rs. 350 billion increase in circular debt for the current fiscal year.

Meanwhile, on Thursday, the federal government scrapped its plans to introduce a mini-budget for FY 2024-25, opting instead for an alternative strategy to bridge the Rs. 605 billion revenue gap.